UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K
 
(Mark One)
x     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal yearperiod ended: March 31, 20122013

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from --- to ---
 
Commission File Number: 000-31810


Cinedigm Digital Cinema Corp.
(Exact name of registrant as specified in its charter)

Delaware 22-3720962
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
   
55 Madison Avenue, Suite 300, Morristown,902 Broadway, 9th Floor New JerseyYork, NY 0796010010
(Address of principal executive offices) (Zip Code)
(973) 290-0080
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: 
Title of each className of each exchange on which registered
CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARENASDAQ GLOBAL MARKET
  
Securities registered pursuant to Section 12(g) of the Act:NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
Yes o No x
  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
 
Yes x No o
  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
 
Yes x No o
  
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
 
 
o
  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer  o
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  x
  (Do not check if a smaller reporting company)  
     
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer based on a price of $1.19$1.35 per share, the closing price of such common equity on the Nasdaq Global Market, as of September 30, 2011,2012, was $40,654,28161,034,849.  For purposes of the foregoing calculation, all directors, officers and shareholders who beneficially own 10% of the shares of such common equity have been deemed to be affiliates, but the Company disclaims that any of such persons are affiliates.

As of June 11, 2012,2013, 48,046,05348,396,697 shares of Class A Common Stock, $0.001 par value and 0 shares of Class B Common Stock, $0.001 par value were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Items 10, 11, 12, 13 and 14 of Form 10-K is incorporated by reference into Part III hereof from the registrant’s Proxy Statement for the 20122013 Annual Meeting of Stockholders to be held on or about September 12, 20122013.



CINEDIGM DIGITAL CINEMA CORP.
TABLE OF CONTENTS

 
Page
 
FORWARD-LOOKING STATEMENTS
1
 
PART I
ITEM 1.Business
1
ITEM 1A.Risk Factors
11
ITEM 2.Property
2221
ITEM 3.Legal Proceedings
2322
ITEM 4.Mine Safety Disclosures
2322
 
PART II
ITEM 5.Market for Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
2423
ITEM 6.Selected Financial Data
2524
ITEM 7.Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
2725
ITEM 8.Financial Statements and Supplementary Data
4140
ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
4241
ITEM 9A.Controls and Procedures
4241
ITEM 9B.Other Information
4241
 
PART III
ITEM 10.Directors, Executive Officers and Corporate Governance
4342
ITEM 11.Executive Compensation
4342
ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
4342
ITEM 13.Certain Relationships and Related Transactions
4342
ITEM 14.Principal Accountant Fees and Services
4342
 
PART IV
ITEM 15.Exhibits, Financial Statement Schedules
43
  
SIGNATURES
44




FORWARD-LOOKING STATEMENTS

Various statements contained in this report or incorporated by reference into this report constitute “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are based on current expectations and are indicated by words or phrases such as “believe,” “expect,” “may,” “will,” “should,” “seek,” “plan,” “intend” or “anticipate” or the negative thereof or comparable terminology, or by discussion of strategy. Forward-looking statements represent as of the date of this report our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us. Such forward-looking statements are based largely on our current expectations and are inherently subject to risks and uncertainties. Our actual results could differ materially from those that are anticipated or projected as a result of certain risks and uncertainties, including, but not limited to, a number of factors, such as:

successful execution of our business strategy, particularly for new endeavors;
the performance of our targeted markets;
competitive product and pricing pressures;
changes in business relationships with our major customers;
successful integration of acquired businesses;
general economic and market conditions in the United States;conditions;
the effect of our indebtedness on our financial condition and financial flexibility, including, but not limited to, the ability to obtain necessary financing for our business; and
the other risks and uncertainties that are set forth in Item 1, “Business”, Item 1A "Risk Factors"and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results.  Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the Securities and Exchange Commission (“SEC”) pursuant to the SEC's rules, we have no duty to update these statements, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking information contained in this report will in fact transpire.

In this report, “Cinedigm,” “we,” “us,” “our” and the “Company” refers to Cinedigm Digital Cinema Corp. and its subsidiaries unless the context otherwise requires.

PART I

ITEM 1. BUSINESS

OVERVIEW

Cinedigm Digital Cinema Corp. was incorporated in Delaware on March 31, 2000 (“Cinedigm”, and collectively with its subsidiaries, the “Company”).

Over the past decade, the Company has played a significant role in the digital distribution revolution that continues to transform the media landscape. In addition to its pioneering role in transitioning almost 12,000 movie screens from traditional film prints to digital distribution, the Company continues to advance worldwide cinema modernization with its suite of software products allowing exhibitors and distributors to manage their digital businesses with efficiency, insight and lower costs. And, as a leading distributor of independent content, the Company collaborates with producers and the exhibition community to market, source, curate and distribute quality content to targeted and profitable audiences through (i) theatrical releases, (ii) existing and emerging digital home entertainment platforms, including iTunes, Amazon Prime, Netflix, xBox, Playstation, and cable video-on-demand ("VOD") and (iii) physical goods, including DVD and Blu-ray. The Company's library of over 5,000 physical goods titles and 20,000 digital titles from more than 650 independent rights holders includes award-winning documentaries from Docurama Films®, next-generation independent movies from Flatiron Film Company® and acclaimed independent movies and festival picks through partnerships with the Sundance Institute and Tribeca Film. The Company is a digital cinema services, softwareproud to distribute many Oscar®-nominated movies including “The Invisible War,” “Hell and content marketingBack Again,” “GasLand,” “Waste Land” and distribution company supporting and capitalizing on the conversion of the exhibition industry from film to digital technology and the accelerating shift in the home entertainment market to digital and video-on-demand services from physical goods such as DVDs.  The Company provides a digital cinema platform that combines technology solutions, financial advice and guidance, and software services to content owners and distributors and to movie exhibitors.  Cinedigm leverages this digital cinema platform with a series of business applications that utilize the platform to capitalize on the new business opportunities created by the transformation of movie theatres into networked entertainment centers.  The two main applications provided by Cinedigm include (i) its end-to-end digital entertainment content acquisition, marketing and distribution business focused on the distribution of alternative content and independent film in theatrical and ancillary home entertainment markets; and (ii) its operational, analytical and transaction processing software applications.  Historically, the conversion of an industry from analog to digital has created new revenue and growth opportunities as well as an opening for new players to emerge to capitalize on this technological shift.“Paradise Lost 3: Purgatory.”

The Company reports its financial results in four primary segments as follows: (1) the first digital cinema deployment (“Phase I Deployment”), (2) the second digital cinema deployment (“Phase II Deployment”), (3) digital cinema services (“Services”) and (4) media content and entertainment (“Content & Entertainment”).  The Phase I Deployment and Phase II Deployment segments are the non-recourse, financing vehicles and administrators for the Company's digital cinema equipment (the

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“Systems” “Systems”) installed in North American movie theatres nationwide.theatres.  The Services segment provides services, software and support to the Phase I Deployment and Phase II Deployment segments as well as directly to exhibitors and other third party customers.  Included in these services are

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asset management services for a specified fee via service agreements with Phase I Deployment and Phase II Deployment as well as third party exhibitors as buyers of their own digital cinema equipment; and software license, maintenance and consulting services to Phase I and Phase II Deployment, various other exhibitors, studios and other content organizations.  These services primarily facilitate the conversion from analog to digital cinema and have positioned the Company at what it believes to be the forefront of a rapidly developing industry relating to the distribution and management of digital cinema and other content to theatres and other remote venues worldwide.  The Content & Entertainment segment provides content marketingis a market leader in the three pillars of digital entertainment distribution - aggregation and distribution, services in both theatrical releasing and ancillary homebranded and curated over the top ("OTT") entertainment markets to alternativechannels and independent film content owners and to theatrical exhibitors.applications.

On April 20, 2012, we acquired New Video Group, Inc. ("New Video"), an independent home entertainment distributor of quality packaged and digital content that provides distribution services in the DVD, BD,Blu-ray, Digital and VOD channels for more than 500 independent rights holders. New Video will bewas integrated into the Company's Content & Entertainment segment.

During the fiscal year ended March 31, 2012, the Company discontinued and sold the following non-core businesses:

In September 2011, the Company completed the sale of its cinema advertising services business, Unique Screen Media ("USM") to a third party, which was previously included in our Content & Entertainment segment; and
In November 2011, the Company completed the sale of the majority of assets of its Digital Media Services Division (“DMS”) digital distribution and delivery business, which was previously included in our Services segment, to a third party.

As a consequence, it was determined that the above former businesses met the criteria for classification as discontinued operations during the respective periods and their respective assets and liabilities met the criteria for classification as “assets held for sale” and “liabilities as part of assets held for sale”, respectively. The consolidated financial statements and the notes to consolidated financial statements presented herein have been recast solely to reflect the adjustments resulting from these changes in classification. Please see Note 3 to the Consolidated Financial Statements for further information.

In addition to the above, the Company has classified certain of its businesses as discontinued operations, including the motion picture exhibition to the general public (“Pavilion Theatre”), information technology consulting services and managed network monitoring services (“Managed Services”) and hosting services and network access for other web hosting services (“Access Digital Server Assets”), all of which were separate reporting units previously included in our former "Other" segment. In August 2010, the Company sold both Managed Services and the Access Digital Server Assets to third parties. In May 2011, the Company completed the sale of certain assets and liabilities of the Pavilion Theatre to a third party. As a result of the sales, the "Other" segment no longer exists as a reportable segment of the Company.


DEPLOYMENT

The Phase I Deployment and Phase II Deployment segments consist of the following:
Operations of: Products and services provided:
Cinedigm Digital Funding I, LLC (“Phase 1 DC”) 
Financing vehiclevehicles and administratoradministrators for the Company's 3,724 Systems installed nationwide in Phase 1 DC's deployment to theatrical exhibitors.  The Company retains ownership of the Systems and the residual cash flows related to the Systems after the repayment of all non-recourse debt and the Company retains ownership of the Systems at the expiration of exhibitor master license agreements.

Access Digital Cinema Phase 2 Corp. (“Phase 2 DC”) Financing vehicles and administrators for the Company's 7,980 Systems installed in the second digital cinema deployment, through Phase 2 DC (the “Phase II Deployment”).DC. The Company retains no ownership of the residual cash flows and digital cinema equipment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements. In many cases, exhibitors own the equipment under an Exhibitor-Buyer Structure.


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In June 2005, we formed Phase 1 DC, a wholly-owned subsidiary of Access Digital Media, Inc. (“AccessDM”), to purchase up to 4,000 Systems for our Phase I Deployment, under an amended framework agreement (the “Framework Agreement”) with Christie Digital Systems USA, Inc. (“Christie”). In December 2007, Phase 1 DC completed its Phase I Deployment with 3,724 Systems installed.

In October 2007, we formed Phase 2 DC for the administration of up to 10,000 additional Systems for our Phase II Deployment, of which a portion of such Systems will behave been purchased through an indirectly wholly-owned subsidiary, Access Digital Cinema Phase 2 B/AIX Corp. (“Phase 2 B/AIX”).  As of March 31, 20122013 Phase II Deployment had 6,725 systems under license agreement and had installedcompleted its deployment period with 5,6097,980 of such systems to date.installed.

Digital Cinema

The business of Phase 1 DC and Phase 2 DC consists of the ownership and licensing of digital systemsSystems to theatrical exhibitors and the collection of virtual print fees ("VPFs") from motion picture studios and distributors and alternative content fees ("ACFs") from alternative content providers and theatrical exhibitors, when content is shown on exhibitors' screens.  We have licensed the necessary software and technology solutions to the exhibitor and have facilitated the industry's transition from analog (film) to digital cinema.  As part of Phase 1 DC's Phase I Deployment of digital systems,Systems, Phase 1 DC has agreements with nine motion picture studios and certain smaller independent studios and exhibitors, allowing Phase 1 DC to collect VPFs and ACFs when content is shown in theatres, in exchange for having facilitated and financed the deployment on 3,724 Systems.  Phase 1 DC has agreements with sixteen theatrical exhibitors that license our Systems in order to show digital content distributed by the motion picture studios and other providers, including Cinedigm Content and Entertainment Group (see Content and Entertainment section below).  

In connection with the Phase II Deployment, Phase 2 DC has entered into digital cinema deployment agreements with eight motion picture studios and certain smaller independent studios and exhibitors for the distribution of digital movie releases to motion picture exhibitors equipped with Systems, and providing for payment of VPFs to Phase 2 DC and Cinedigm Digital Funding 2, LLC ("CDF2"). As of March 31, 20122013, Phase 2 DC also entered into master license agreements with 191269 exhibitors and CDF2 covering a total of 6,7258,565 screens, whereby the exhibitors agreed to the placement of Systems as part of the Phase II Deployment. Included inWith the 6,725 contractedcompletion of the deployment period for Phase 2 DC and as of March 31, 2013, the Company has 7,980 Phase 2 DC Systems installed, including 5,477 screens are contracts covering 4,549 screens with 168 exhibitors under the Exhibitor-Buyer Structure, 1,0301,049 screens covering 910 exhibitors through non-recourse financing provided by KBC Bank 1,123NV (“KBC”), 1,431 screens covering 1217 exhibitors through CDF2, and 23 screens under other arrangements with 2 exhibitors.


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Exhibitors will paypaid an installation fee of up to $2$2 thousand per screen out of the VPFs collected to the Company's Digital Cinema Services division. The Company will managemanages the billing and collection of VPFs and will remitremits all VPFs collected to the exhibitors, less an administrative fee that will approximate up to 10% of the VPFs collected. For Systems covered under the Exhibitor-Buyer Structure and CDF2, the Company will havehas no debt, property and equipment, financing costs or depreciation recorded to its consolidated financial statements. Cinedigm will continue through June 30, 2013 to deploy Systems under the Exhibitor-Buyer Structure through "drive-in" theatres and will continue to seek further opportunities internationally. For Phase 2 DC Systems the Company will ownowns and finance,finances on a recourse basis, it typically receives a similar up to $2$2 thousand installation fee and an ongoing administrative fee that will approximate up to 10% of VPFs collected. As of March 31, 2012, the Company has 5,609 Phase 2 Systems installed, including 3,794 screens under the Exhibitor-Buyer Structure, 973 KBC non-recourse financed screens, 819 CDF2 screens and 23 screens under other arrangements.

VPFs are earned pursuant to the contracts with movie studios and distributors, whereby amounts are payable to Phase 1 DC and to Phase 2 DC according to fixed fee schedules, when movies distributed by the studio are displayed on screens utilizing our Systems installed in movie theatres. One VPF is payable for every movie title displayed per System upon the initial booking of such movie. The amount of VPF revenue is therefore dependent on the number of unique movie titles released and displayed using the Systems. Phase 2 DC earns VPF revenues only for Systems that it owns.

Phase 2 DC's agreements with distributors require the payment of VPFs for 10ten years from the date each system is installed, however, Phase 2 DC may no longer collect VPFs once “cost recoupment”, as defined in the agreements,contracts with movie studios and distributors, is achieved.  Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase 2 DC have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, subject to maximum agreed upon amounts during the four-year rollout period and thereafter, plus a compounded return on any billed but unpaid overhead and ongoing costs, of 15% per year.  Furthermore, if cost recoupment occurs before the end of the 8theighth contract year, a one-time “cost recoupment bonus” is payable by the studios to Phase 2 DC.  Any other cash flows, net of expenses, received by Phase 2 DC following the achievement of cost recoupment are required to be returned to the distributors on a pro-rata basis. At this time, the Company cannot estimate the timing or probability of the achievement of cost recoupment.

Customers

Digital Cinema customers are mainly motion picture studios and theatrical exhibitors. For the fiscal year ended March 31, 20122013, four customers, 20th Century Fox, Paramount Pictures, Sony Pictures Releasing Corporation ("Sony") and Warner Brothers, each

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represented approximately 10% or more of Phase 1 DC's revenues and together generated 52%63%, 59%56% and 40%37% of Phase 1 DC's, Phase 2 DC's and consolidated revenues, respectively, and with exception of Sony are also customers for entertainment software. In addition, Warner Brothers and 20th Century Fox comprise approximately 12% andalso represents 11% of consolidated revenues of the Company. No Phase 1 DC or Phase 2 DC customers comprised more than 10% of the Company's consolidated accounts receivable, respectively.receivable. We expect to continue to conduct business with each of these customers during the fiscal year ending March 31, 2013.2014.

Seasonality

Deployment revenues derived from the collection of VPFs from motion picture studios are seasonal, coinciding with the timing of releases of movies by the motion picture studios. Generally, motion picture studios release the most marketable movies during the summer and the winter holiday season. The unexpected emergence of a hit movie during other periods can alter the traditional trend. The timing of movie releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or any other quarter. The seasonality of motion picture exhibition, however, has become less pronounced as the motion picture studios are releasing movies somewhat more evenly throughout the year.

SERVICES

The Services segment provides a variety of services to the Company's Phase 1 and Phase 2 deployments, exhibitor-buyers and other third party customers. Services consist of the following:
Operations of: Products and services provided:
Digital Cinema Services Provides monitoring, billing, collection, verification and other management services to the Company'sCompany’s Phase I Deployment, Phase II Deployment, CDF2 Holdings, LLC ("CDF2 Holdings"), as well as to exhibitors who purchase their own equipment. Collects and disburses VPFs from motion picture studios and distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors.
Hollywood Software, Inc. d/b/a Cinedigm Software (“Software”) Develops and licenses software to the theatrical distribution and exhibition industries as well as other content owners, provides application service provider ("ASP Service,Service"), and provides software enhancements and consulting services.

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Digital Cinema Services

The Digital Cinema Services (“Services”) division provides monitoring, billing, collection, verification and other management services to Phase 1 DC and Phase 2 DC as well as to exhibitor-buyers who purchase their own equipment. This division services the Company's 3,724 screens in the Phase 1 deployment for a monthly service fee equal to 5% of the VPFs earned by Phase 1 DC. InDC and an incentive service fee equal to 2.5% of the fiscal year ended March 31, 2012 and 2011, ServicesVPFs earned $2.5 million and $2.4 million, respectively, of service fees fromby Phase 1 DC.

In addition, Services provides services to the 5,6097,980 Phase 2 Systems deployed as of March 31, 20122013 and will service the remaining screens deployed, up to 10,000, in the Phase II Deployment.. Services typically receives an activation and installation fee of up to $2$2 thousand per Phase 2 System as well as a monthly service fee that approximates up to 10% of the VPFs earned by Phase 2 DC. The total Phase 2 service fees are subject to an annual limitation under the terms of the Company's Phase 2 agreements with the motion picture studios.studios, and additionally, are determined based upon the respective Exhibitor-Buyer Structure, KBC or CDF2 agreements. Any unpaid services fees in any period remain an obligation to Phase 2 DC in the cost recoupment framework and accrue a 15% cost of capital return until paid out of future VPFs. These fees are not recognized as income or accrued as an asset on the Company's balance sheet given the uncertainty of the total number of screens ultimately deployed in Phase 2.receipt and the timing thereof as future movie release and bookings are not known. Service fees are accrued and recognized only on deployed Phase 2 Systems. As a result, the annual service fee limitation is variable until these fees are paid.

In February 2013,  we assigned to our newly formed wholly-owned subsidiary, Cinedigm DC Holdings LLC (“DC Holdings LLC”), the fiscal years ended March 31, 2012(i) right and 2011, Services earned $1.6 millionobligation to service the digital cinema projection systems from the Phase I Deployment and $1.9 million, respectively,certain systems that were part of related servicesthe Phase II Deployment, (ii) delegated to DC Holdings the right and obligation to service certain other systems that were part of the Phase II Deployment and (iii) assigned to DC Holdings LLC the right to receive servicing fees from the Phase 2 DC.I and Phase II Deployments.  We also agreed to transfer to DC Holdings certain of our operational staff whose responsibilities and activities relate solely to the conduct of such servicing business and to provide DC Holdings LLC with the right to use the supporting software and other intellectual property associated with the operation of the servicing business.  DC Holdings entered into a term loan agreement (the “Prospect Loan”) with Prospect Capital Corporation (“Prospect”) which restricts DC Holdings LLC and its subsidiaries (including CDF I) from, among other things, (with certain specified exceptions):
making investments;
making capital expenditures beyond certain limits;
incurring other indebtedness or liens;
engaging in a new line of business;
entering into or amending certain agreements and contracts;
selling or disposing of assets;
acquiring, consolidating with, or merging with or into other companies; and
entering into transactions with affiliates.

Finally, Services has formed international servicing partnerships in Australia and New Zealand with ICAAthe Independent Cinema Association of Australia to service up to 875 screens and is currently negotiating VPF agreements for Australia and New Zealand with the major Hollywood Studios, Similarly, Services has created a partnership in Brazil with Beyond All to service up to 600 screens in Brazil and is currently negotiating VPF agreements for Brazil with the major Hollywood studios. In November 2012, we formed Cinedigm Digital Cinema Australia Pty Ltd as part of our international strategy. Services is exploring other similar international servicing partnerships in additional geographic locations.


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Customers

For the fiscal year ended March 31, 20122013, one no customer Warner Brothers, comprised 13%more than 10% of Services' revenues. We expect to continue to conduct business with Warner Brothers during the fiscal year ending March 31, 2013.revenues or accounts receivable.

Competition

The CompanyServices faces limited competition domestically in its digital cinema services segmentbusiness as the major Hollywood movie studios have only signed digital cinema deployment agreements (“DCDAs”) with five entities, including the Company. The other entities with all such agreements include: Digital Cinema Implementation Partners (“DCIP”), a joint venture of three large exhibitors (Regal Entertainment Group ("Regal"), AMC Entertainment Holdings, Inc. ("AMC") and Cinemark Holdings, Inc. ("Cinemark")) focused on managing the conversions of those three exhibitors; Sony Digital Cinema to support the deployment of Sony projection equipment; Christie Digital Systems USA, Inc. to support the deployment of Christie equipmentequipment; and GDC, Inc ("GDC") to support the deployment of GDC servers.equipment. The Company has a significantly greater market share than all other competitors beyond the DCIP consortium which services a total of approximately 17,20016,000 total screens representing its consortium members.

As Cinedigmthe Company expands its servicing platform internationally, an additional competitor beyond those listed above consists of Arts Alliance, Inc. ("Arts Alliance"), a leading digital cinema servicer focused on the European markets, GDC, as well as other

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potential local start-ups seeking to service a specific international market. CinedigmThe Company often seeks to partner with a leading local entity to combine our efficient servicing infrastructure and strong studio relationships with the necessary local market expertise and exhibitor relationships.

Software Division

Software provides proprietary software applications and services to support movie exhibition and distribution customers of varying sizes, through enterprise software licenses and maintenance fees, software as a service (“SaaS”) fees through which it hosts various applications and provides client access via the Internet,  data and analytical software tools and services, software customizations, consulting services including training and installation certification through its workshop and training sessions.   Current proprietary software of Software consists of the following:
Proprietary Software Product:Purpose:
Theatre Command Center® (“TCC”)Complete management of digital theatres. Automates the creation of digital shows, manages all digital movies, trailers, advertising and alternative content.
TCC EnterpriseLinks theatres running TCC to consolidate circuit-wide operational data and centralize key functions. Enterprise also includes functionality to compute, invoice and manage Virtual Print Fee program obligations.
Theatrical Distribution System® (“TDS”)
Enables domestic distributors to plan, book and account for theatrical movie releases and to collect and analyze related financial operations data.

Theatrical Distribution System (Global) (“TDSG “)Enables international distributors to plan, book and account for theatrical movie releases and to collect and analyze related financial operations data.
Exhibition Management System™ (“EMS™”)Enables domestic theatre owners to plan, book and account for theatrical movie releases and to collect and analyze related financial operations data.
Royalty Transaction Solution (“RTS”)Enables licensors and licensees to manage and account for all intellectual property rights and royalty transactions.
CineXchangeCineXchange is a new web-based platform providing theatrical data, analytics and software services.
CinesuiteCinesuite is a portfolio of proprietary applications developed to manage and facilitate the duplication and distribution of digital media via terrestrial, broadband and satellite delivery methods.

TCC

Our TCC system is installed as a component of all Phase 1 DC and Phase 2 DC Systems as well as our international deployments and partnerships. It provides in-theatre management for digitally-equipped movie theatres, enabling an exhibitor to control all the screens in a movie theatre, manage content and version review, assess and manage building, program scheduling and encryption security key management from a central terminal, whether located in the projection booth, the theatre manager's office or both.  Software receives upfront license fees from all TCC installations.  Phase 2 DC Systems also generate maintenance revenues and Cinedigmthe Company licenses TCC to other domestic and international deployment entities and exhibitors.

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TCC Enterprise

TCC Enterprise is used by exhibitors and their service partners to centrally at the home office monitor and manage digital operations at theatres utilizing the TCC theatre management system. TCC Enterprise receives real-time information from all networked TCC systems to provide a consolidated view of shows, content and system performance. TCC Enterprise also centralizes certain key operational tasks enabling theatrical exhibitors greater control and consistency in managing their digital theatres. TCC Enterprise also includes a powerful Virtual Print Fee (VPF)VPF management module that is used by Cinedigm to manage obligations and reporting under its studio VPF agreements and can be licensed to third parties as part of our international partnerships.

Domestic Theatrical Distribution Management

Our TDS product is currently the system of choice to manage domestic theatrical movie releases for two of the six major motion picture studios expectsand we expect to complete the customization and installation of TDS at the 3rd major studio in the second quarter ofduring the fiscal year ending March 31, 20132014 and for almost all other domestic mini-major and independent filmmovie distributors.  The main competition for TDS has been in-house development by the motion picture studios.  For the fiscal years ended March 31, 20122013 and 20112012, the TDS product comprised 34%33% and 44% of Software's revenues, respectively.


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International Theatrical Distribution Management

TDSG supports the planning, booking and operations of worldwide movie distribution, with multi-language and multi-currency capabilities. TDSG's unique design incorporates the business rules for all supported territories within a single application.  Software's primary customer is Fox International ("Fox") who is actively deploying the system in up to eighteen international territories.  In December 2008, Software reached an agreement in which Fox International is completing the development of its outstanding territories at their sole expense and had two years to deliver the software to the Company.  By December 2010, Fox International had provided certain software to the Company in fulfillment of its obligations. The Company is currently expanding its marketing of TDSG internationally.

Exhibition Management

EMS™ is a powerful and comprehensive solution for managing the planning, booking, auditing, distributor payments and accounting by theatrical exhibitors. EMS interfaces with the customers' box office ticketing, point-of-sale, and other systems to streamline operations and eliminate manual processes. In March 2011,Major EMS customers include AMC and Carmike Theaters, Inc. as well as a number of other mid-sized and smaller exhibitors. Software signed a license and maintenance fee agreement for EMS™ with the second-largest domestic exhibitor, AMC Entertainment, Inc. and expects to complete its implementation during the fiscal year ending March 31, 2013. The Company expects additional opportunities to license this product now that most exhibitors have converted to digital.

IP Rights and Royalty Management

RTS is a web-based solution for the management by licensors and licensees of intellectual property rights, which was part of a prior acquisition. RTS is utilized by major content rights owners including Starz Entertainment, Shout Factory and Cinedigm Content and Entertainment Group (“CEG”).

CineXchange

CineXchange is Cinedigm Software's internetInternet platform for providing data, analytics and software services developed from digital cinema data and other theatrical data sources. The basic CineXchange framework enables users to securely access and utilize products and services via the internetInternet on multiple computing devices. CineXchange is the portal through which Cinedigm Software will extend the functionality of its existing client-server based applications as well as new applications and services.

Cinesuite

The Cinesuite portfolio includes various proprietary applications that were developed to support the Company's Digital Media Servicesformer digital media services business, and several applications have been licensed to third parties. Although the key assets of the Digital Media Services'digital media services' business were sold to Technicolor in FYduring the fiscal year ended March 31, 2012, the CompanySoftware retained its ownership of its proprietary software applications and transaction agreement included a license to Technicolor to use the Cinesuite applications. The CompanySoftware has also licensed this product suite to a Fortune 50 company in India, a delivery entity in Mexico and is actively pursuing additional licensing opportunities for these unique products. The Cinesuite portfolio includes:

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Proprietary Software Product:Purpose:
CineBookerTheatre booking interface used to view and manage the Digital Cinema Package digital delivery requests from the studios and alternate content providers.
CineCasterMulticast and unicast file delivery technology to facilitate distribution of digital cinema packages to a large network of theatres.   
CineClonerHard drive replication system used to duplicate digital cinema packages for large scale terrestrial distribution to theatres.
CineConnectWide area networking solution used to provide secure connectivity to participating theatres to enable sharing of critical information to support digital cinema security requirements.
CineKeyHigh-speed key delivery message creation, delivery, and management solution used to support the decryption requirements of digital cinema content to theatres.
CineLibraryDigital cinema media repository used to aggregate digital assets in preparation for delivery to theatres.
CineLiveSuper high-definition live 2D and 3D technologies to bring crisp and clear live events in immersive 5.1 surround sound to enabled theatres around the world.
CineOfficeRules and profile based digital cinema delivery billing management solution that provides customizable billable detail to various accounting packages.
CineShipperDelivery management solution that facilitates the distribution of digital cinema package hard drives via multiple carriers and tracks the physical assets and their delivery status.
CineWorkflowHigh-level tools to coordinate the overall digital cinema delivery obligation and enables a common interface for other Cinedigm digital delivery software products.
CineXpress PortalIn-theatre broadband appliance that allows theatre operators to receive, manage, transfer, and request trailers, KDMs, and other digital cinema content.


Research and Development

During the fiscal years ended March 31, 20122013 and 20112012, the Company's recorded research and development expenses of approximately $0.20.1 million and $0.3$0.2 million,, respectively, and was comprised mainly of personnel costs and third party contracted services attributable to research and development efforts at Software related to the development of our digital software applications and various product enhancements to TDS and EMS™.

Market Opportunity

We believe that:

Software's products are becoming an industry leading method by which motion picture studios and theatrical exhibitors plan, manage and monitor operations and data regarding the presentation of theatrical entertainment;
By adapting this system to serve the expanding digital entertainment industry, Software's products and services are accepted as an important component in the digital content delivery and management business;
The digital cinema conversion process is accelerating demand for Software's products as exhibitors realize the cost savings and revenue enhancements available from greater automation and analytical tools;
The global digital cinema conversion process is producing significant new data flows from the networked digital projection systems and driving the demand for data and analytical tools to gather, analyze and report on this information;
The continued transition to digital content delivery will require a high degree of coordination among content providers, customers and intermediary service providers;

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Demand is increasing for various transaction processing capabilities to streamline theatrical distribution, reduce manual processes and provide greater scheduling and booking flexibility;
Producing, buying and delivering media content through worldwide distribution channels is a highly fragmented and inefficient process; and
Technologies created by Software and the continuing development of and general transition to digital forms

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of media will help the digital content delivery and management business become increasingly streamlined, automated and enhanced.

Intellectual Property

Software currently has intellectual property consisting of:

Licensable software products, including TCC, TCC Enterprise, TDS, TDSG, EMS™, RTS, CineXchange and all Cinesuite applications;
Registered trademarks for the Theatre Command Center®, Theater Command Center®, and Theatrical Distribution System®;
Domain names, including EPayTV.com, EpayTV.net, HollywoodSoftware.com, HollywoodSoftware.net, Indie-Coop.com, Indie-Coop.net, Indiedirect.com, IPayTV.com; PersonalEDI.com, RightsMart.com, RightsMart.net, TheatricalDistribution.com and Vistapos.com;
Unregistered trademarks and service marks, including Coop Advertising V1.04, EMS ASP, Exhibitor Management System, Hollywood SW, Inc., HollywoodSoftware.com, Indie Co-op, Media Manager, On-Line Release Schedule, RightsMart, and TheatricalDistribution.com; and
Logos, including those in respect of Hollywood SW, TDS and EMS™.

Customers

For the fiscal year ended March 31, 20122013, one no customer Insight, representedcomprised more than 10% or more of Software's revenues and generated 19% and 10% of Software's and Services' revenues, respectively. Insight is a reseller of Cinedigm's software that is embedded in the servers that are sold to the exhibitors in all Cinedigm digital cinema deployments. As a result, we do not believe this represents material concentration risk within Software as other resellers exist in the marketplace. We expect to continue to conduct business with this customer during the fiscal year ending March 31, 2013.or accounts receivable.

Competition

Within the major domestic motion picture studios and exhibition circuits, Software's principal competitors for its products are in-house development teams, which generally are assisted by outside contractors and other third parties. Most domestic motion picture studios that do not use the TDS software use their own in-house developed systems. Internationally, Software is aware of one vendor based in the Netherlands providingMACC licenses similar software. Software's movie exhibition product, EMS™, competes principally with customized solutions developed by the large exhibition circuits as well as point of sale system modules attempting to provide comparable functionality. We believe that Software throughalso competes with Arts Alliance to secure international installations of its technologyTCC and management experience, may differentiate itself by providing a competitive alternative to their forms of digital content delivery and management business.TCC Enterprise product.

Government Regulation

Except for the requirement of compliance with United States export controls relating to the export of high technology products, we are not subject to government approval procedures or other regulations for the licensing of our Entertainment Software products.

The distribution of movies is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases. Motion picture studios offer and license movies to theatrical exhibitors, on a movie-by-movie and theatre-by-theatre basis. Consequently, theatrical exhibitors cannot assure themselves of a supply of movies by entering into long-term arrangements with motion picture studios, but must negotiate for licenses on a movie-by-movie basis. We maintain Federal Communications Commission (“FCC”) broadcast licenses related to our satellite transmission of content and should we violate any FCC laws, we may be subject to fines and or forfeiture of our broadcast licenses.


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CONTENT & ENTERTAINMENT

The Content & Entertainment segment consists of the following:
Operations of: Products and services provided:
Cinedigm Content and Entertainment Group (“CEG”)CEG Acquires, distributes
As a leading distributor of independent digital content, CEG collaborates with producers and provides the marketing for programs of alternativeexhibition community to market, source, curate and distribute independent content to targeted and feature films to movie exhibitors.profitable audiences in theatres and homes, and via mobile and emerging platforms.



In January 2007, through our wholly owned subsidiary, Vistachiara Productions, Inc., we purchased substantially
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CEG is a leader in the digital distribution revolution that is transforming the independent content landscape, and is uniquely positioned to benefit from all aspects of the assets of BP/KTF, LLC (the “CEG Acquisition”). CEG provides marketingrevolution, from distribution in theatres to home, mobile and distribution services to owners of alternative content, such as live sports, musical concerts, kids programming, cultural events, and other niche programming tied to avid audiences on a programmatic basis and to producers of independent films. CEG is meeting the needs of exhibitors for greater variety of content to increase exhibition capacity utilization of approximately 5% in the off-peak Monday to Thursday period and less than 20% in aggregate annually. CEG leverages the exhibition relationships developed by Cinedigm to create a unique and valuable marketing and distribution service on top of the digital cinema network. CEG also partners to manage the distribution of alternative content and independent films into the ancillary home entertainment markets through a 50/50 joint venture formed in January with New Video, Inc. to jointly acquire the distribution rights of independent film and alternative content in all media for 7-15 years in the North American markets. Subsequent to the end of the fiscal year ended March 31, 2012, Cinedigm completed the acquisition of New Video (see Subsequent Events). CEG acquires all distribution rights for an upfront advance cash payment or minimum revenue guarantee plus a theatrical marketing commitment that is then repaid prior to all other obligations from all future theatrical and ancillary revenue sources. CEG receives a distribution fee typically equal to 25-35% of all revenues earned through the distribution of the contentemerging platforms, including iTunes, Amazon Prime, Netflix, xBox, Playstation, as well as a shareDVD, Blu-ray and VOD. CEG has focused its activities on three main areas of any back-end profits earned through its distribution activities. In addition, CEG also offers its theatrical marketingbusiness: (i) Aggregation and distribution of content libraries in the home entertainment market; (ii) theatrical and subsequent home entertainment releasing of newly acquired independent movies; and (iii) the creation and launching of branded, curated over-the-top entertainment channels and applications. With these three complementary entertainment distribution capabilities, Cinedigm is capitalizing on the key drivers of value we believe critical to success in independent content going forward. On April 20, 2012, the Company acquired Cinedigm Entertainment Corp. f/k/a New Video Group, Inc. ("New Video"), an independent home entertainment distributor of quality packaged and digital content that provides distribution services throughin the DVD, Blu-ray, Digital and VOD channels for more than 500 independent rights holders, and was integrated into the Company's Content & Entertainment segment.

Theatrical releasing

As of June 11, 2013, we have acquired 17 titles for theatrical release, ranging from horror to documentaries. Our goal is to release 18 to 20 new movies per year. Our first acquisition, The Invisible War, was nominated for an Academy Award® and won the prestigious Spirit Award®. Other high profile releases include THE ENGLISH TEACHER with Julianne Moore and Greg Kinnear, ARTHUR NEWMAN with Colin Firth and Emily Blunt, VIOLET AND DAISY with James Gandolfini and SHORT TERM 12, the critically acclaimed winner of the South By Southwest Festival starring Bree Larson.

Additionally, CEG is engaged in Alternative Content theatrical releasing via its Indie Direct service forrecently launched DOCURAMA FESTIVAL. This seven week series ran in 15 markets and brought acclaimed documentaries to audiences. Following the theatrical stint, the documentaries became available on ancillary platforms, as well as CEG's recently launched Docurama YouTube subscription service.

Distribution and Aggregation

As the leading distributor and aggregator of independent content, CEG maintains a fixed upfront fee and a sharesignificant library of box office and/or downstream content revenues. CEG does not currently invest in production costs of content. CEG has acquired the distribution rights across all media and grows this library annually through new rights acquisitions:
We aggregate over 20,000 movies and TV shows and deliver over 40,000 hours of movie and television to 2 independent films in its fiscal fourth quarter and 2 additional independent films in April 2012. In addition, Indie Direct provided theatrical distribution servicesplatforms;
We deliver over 900 new digital properties monthly for 4 moviesmore than 650 licensors;
We significantly outperformed the industry averages during the fiscal year ended March 31, 2012.2013 with 55% growth in digital revenues, and 65% growth in physical product sales compared to industry growth of 27% and (6%) respectively; and
We announced in May 2013 a long-term physical goods (Blu-ray/DVD) distribution partnership with Universal Home Entertainment, setting the stage for further growth and opportunity for 150 DVDs annually.

OTT Entertainment Channels/Applications

CEG believes that the industry is at the very beginning of an explosion of new networks that will enable content suppliers to directly reach audiences on all connected devices via various mobile platforms, connected televisions and the Internet. Most connected platforms, such as Samsung, Microsoft xBox, Sony Playstation, AppleTV, Roku, as well as other mobile devices offer a limited number of curated applications targeted at avid audiences. CEG sees a significant opportunity for growth on these platforms given our extensive library of digital rights and strong interest from our digital partners. CEG intends to develop a number of proprietary niche advertising-VOD and premium subscription VOD channels over the next one to three years beginning with our existing libraries. CEG's first channel, Docurama, launched in May 2013 with a seven documentary slate release in select movie theaters, along with the launch of a premium YouTube subscription channel and our first OTT application.


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Market Opportunity

We believe that:that the following factors are accelerating growth in independent content as well as are poised to drive CEG growth:

AlternativeProduction
With a red camera® and a computer, moviemakers can cheaply and quickly produce a motion picture suitable for theatrical release creating more, higher quality movies in the marketplace;
Distribution Platforms
In addition to digital theatres that can nimbly program movies, more and more digital retailers and platforms are emerging in the home and mobile arenas, creating an arms race for more new content is a rapidly growing medium with recent industry estimates by Screen Digest expecting the industryand libraries to grow to in excess of $500 million of revenues in 2014 from under $200 million in 2010 and can potentially generate revenues of 3-4 times above that level in ancillary downstream markets; andfill their pipelines;
Independent film distribution continues to expandDistribution Devices
Mobile devices such as the major motion picture studios have reduced their involvementiPhone®, iPad®, Android®-based devices and other mobile players afford consumers with ample opportunities to view content;
Fewer Studio Movies
Studios are producing fewer, albeit bigger, tentpole productions, creating demand by consumers and exhibition for more diverse content;
Exhibition Needs Content
Exhibitors are hungry for content given the reduction in this areathe number of movies produced, creating a void in theatres with less than 5% of seats occupied in theaters Monday through Thursday and manyonly about 15% on an annualized basis; and
Bigger Talent
With fewer movies being produced, bigger talent is heading to smaller independent film distributors have closed their doors due to reduced capital availability as a result of the financial crisis. According to Rentrak Corporation, total box office for non-major studio independent film has historically ranged from $1.8-$2.0 billion. Cinedigm's combination of theatrical distribution relationshipsmovies, creating more marketable indie content (recent examples include “Margin Call,” starring Kevin Spacey, Demi Moore and marketing expertise will enable us to support efforts to fill this void.Jeremy Irons., “Bernie” starring Jack Black, Shirley MacLaine and Matthew McConaughey).

Intellectual Property

There is no intellectual property related to our Content & Entertainment segment.

Customers

For the fiscal year ended March 31, 2012, two customers, ARC Entertainment and The Pokémon Company, each2013, one customer, A&E Network represented 10% or more of CEG's revenues and generated 49% and 21%27% of CEG's revenues, respectively. We expect to continue to conduct business with ARC Entertainment during the fiscal year endingrevenues. A&E Network was not a customer of CEG as of March 31, 2013. However with the acquisition of New Video, we expect our customer concentration will be reduced.

Competition

Numerous companies are engaged in various forms of producing and distributing independent filmmovies and alternative content. These competitors have significantly greater financial, marketing and managerial resources than we do, and have generated greater revenue and are better known than we are. 

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The Company views the following as its principal competition in its content and entertainment segment:


National CineMedia, LLC (NCM), the largest in-theatre advertising business whose 3 largest customers are Regal Entertainment Group, AMC Entertainment, Inc. and Cinemark Holdings, Inc. operates the largest theatrical alternative content and non-feature film content distribution in its Fathom Network;
Sony Pictures Classics, an autonomous division of Sony Pictures Entertainment;
Fox SearchlightMagnolia Pictures;
Focus Features, a division of NBCUniversal;
IFC Entertainment;
Magnolia Pictures; andRoadside Attractions LLC;
The Weinstein Company.Company;
Anchor Bay Entertainment;
Image Entertainment, Inc.; and
Entertainment One (eOne).

ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

During the fiscal year ended March 31, 2012, the Company discontinued and sold the following non-core businesses:

In September 2011, the Company completed the sale of its cinema advertising services business, Unique Screen Media ("USM") to a third party, which was previously included in our Content & Entertainment segment; and
In November 2011, the Company completed the sale of the majority of assets of its Digital Media Services Division (“DMS”) digital distribution and delivery business, which was previously included in our Services segment, to a third party.


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As a consequence, it was determined that the above former businesses met the criteria for classification as discontinued operations during the respective periods and their respective assets and liabilities met the criteria for classification as “assets held for sale” and “liabilities as part of assets held for sale”, respectively, as of March 31, 2012. The consolidated financial statements and the notes to consolidated financial statements presented herein have been recast solely to reflect the adjustments resulting from these changes in classification. Please see Note 3 to the Consolidated Financial Statements within Item 8, "Financial Statements and Supplementary Data" for further information.

Discontinued operations consists of the following:
Operations of: Products and services provided:
AccessDM and FiberSat Global Services, Inc. d/b/a Cinedigm Satellite and Support Services, (“Cinedigm Satellite” and, together with AccessDM, “DMS”)DMS Distributes digital content to movie theatres and other venues having digital cinema equipment and provides satellite-based broadband video, data and Internet transmission, encryption management services, video network origination and management services and a virtual booking center to outsource the booking and scheduling of satellite and fiber networks and provides forensic watermark detection services for motion picture studios and forensic recovery services for content owners.
Access Digital Server AssetsProvides hosting services and provides network access for other web hosting services.
ADM Cinema Corporation (“ADM Cinema”) d/b/a the Pavilion Theatre (the “Pavilion Theatre”) A nine-screen digital movie theatre and showcase to demonstrate the Company's integrated digital cinema solutions.
Core Technology Services, Inc. (“Managed Services”) Provides information technology consulting services and managed network monitoring services through its global network command center (“GNCC”).center.
UniqueScreen Media, Inc. (“USM”)USM Provides cinema advertising services and entertainment.

In August 2010, the Company sold both Managed Services and the Access Digital Server Assets for $1.5 million, consisting of $0.3 million in cash and $1.2 million as a note receivable.  In May 2011, the Company completed the sale of certain assets and liabilities of the Pavilion Theatre for $0.2 million. In September 2011, the Company completed the sale of USM for $6.0 million in cash. In November 2011, the Company completed the sale of the majority of assets of DMS for $1.0 million in cash. In May 2012, the Company sold to a third party the remaining net assets of its non-theatrical DMS business for $0.2 million.

ENVIRONMENTAL

The nature of our business does not subject us to environmental laws in any material manner.

EMPLOYEES

As of March 31, 2012,2013, we had 90160 employees, of which 111 isare part-time and 89149 are full-time. Of our full-time employees, 633 are in sales and marketing, 2243 are in operations, 109 are in research and development, 2927 are in technical services, and 2237 are in executive, finance and administration.

AVAILABLE INFORMATION
 
The Company's Internet website address is www.cinedigm.com. The Company will make available, free of charge at the

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“Investors “Investors - Financial Information” section of its website, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and all amendments to those reports and statements filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC.

In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding companies that file electronically with the Commission.  This information is available at www.sec.gov, the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549 or by calling 1-800-SEC-0330.


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ITEM 1A. RISK FACTORS

An inability to obtain necessary financing may have a material adverse effect on our financial position, operations and prospects if unanticipated capital needs arise.

Our capital requirements may vary significantly from what we currently project and be affected by unforeseen delays and expenses. We may experience problems, delays, expenses and difficulties frequently encountered by similarly-situated companies, as well as difficulties as a result of changes in economic, regulatory or competitive conditions. If we encounter any of these problems or difficulties or have underestimated our operating losses or capital requirements, we may require significantly more financing than we currently anticipate. We cannot assure you that we will be able to obtain any required additional financing on terms acceptable to us, if at all. An inability to obtain necessary financing could have a material adverse effect on our financial position, operations and prospects.

Our Phase I credit agreement (the “Phase I Credit Agreement”) with Société Générale, New York Branch (“SG”) and certain other lenders contains certain restrictive covenants that restrict, among other things, our indirect subsidiary, Cinedigm Digital Funding I, LLC (“CDF I”) and its subsidiaries from, among other things, (with certain specified exceptions) making certain capital expenditures, incurring other indebtedness or liens, engaging in a new line of business, selling certain assets, acquiring, consolidating with, or merging with or into other companies and entering into transactions with affiliates. The Phase I Credit Agreement is non-recourse to the Company and our other subsidiaries. In August 2009, the CompanyFebruary 2013, Cinedigm DC Holdings LLC (“DC Holdings LLC”), our wholly-owned subsidiary to which we transferred our business of servicing digital cinema projection systems, entered into a securities purchaseterm loan agreement (the “Sageview Purchase Agreement”“Prospect Loan”) with an affiliate of SageviewProspect Capital LPCorporation (“Sageview” or the “Purchaser”Prospect”) pursuant to which the Company agreed to issue a Senior Secured Note (the “2009 Note”) in the aggregate principal amount of $75.0 million, which was later amendedrestricts DC Holdings LLC and restated on May 6, 2010 (as so amended and restated, the “2010 Note”). The 2010 Note,its subsidiaries (including CDF I) from, among other things, restricts the Company and its subsidiaries from (with certain specified exceptions) making certain capital expenditures, incurring other indebtedness or liens, creatingengaging in a new line of business, selling certain assets, acquiring, consolidating with, or acquiringmerging with or into other companies and entering into transactions with affiliates. The Prospect Loan is non-recourse to the Company and our other subsidiaries, which do not guarantee such notes, making certain investmentsexcept for Access DM (which is a wholly-owned subsidiary of DC Holdings LLC) and modifying authorized capital. Our indirect subsidiary, Access Digital Cinema Phase 2, B/AIX Corp. (“("ADCP2"), each of which guaranteed the obligations of DC Holdings LLC to Prospect. The Company is responsible for certain non-financial obligations with respect to the Prospect Loan and limited financial support not to exceed $1.5 million per year in the event financial performance does not meet certain defined benchmarks. The Company would not have been required to provide any support in fiscal year 2013 if the Prospect Loan had been outstanding for the full year. Our indirect subsidiary, Phase 2 B/AIX”)AIX has entered into several credit agreements (the “KBC Agreements”) with KBC Bank NV (“KBC”) pursuant to which KBC has financed the acquisition of digital cinema projection systems purchased from Barco, Inc. to be installed at various theatre locations. The non-recourse KBC Agreements, among other things, restrict Phase 2 B/AIX from (with certain specified exceptions) incurring liens, disposingdisposing of certain assets outside the ordinary course of business, merging or consolidating with other entities, changing its line of business and making payments (including dividends) to affiliates. The KBC Agreements are non-recourse to the Company and its subsidiaries other than Phase 2 B/AIX and are consolidated by the Company similarly to CDF I. In October, 2011, we began earning fees under a management services agreement with CDF2 Holdings, LLC (“CDF2 Holdings”), an indirect wholly-owned non-consolidated variable interest entity that is intended to be a special purpose, bankruptcy remote entity.entity, and CDF 2, a wholly-owned subsidiary of CDF2 began fundingHoldings. The revenues under this management service agreement were assigned to DC Holdings LLC as of February 28, 2013. CDF2 financed certain digital systems under its credit agreement with SG and certain other lenders (the “Phase II Credit Agreement”). ThisThe Phase II Credit Agreement contains certain restrictive covenants that, among other things, restrict CDF2 Holdings, CDF 2 and itstheir subsidiaries from, among other things, (with certain specified exceptions) making certain capital expenditures, incurring other indebtedness or liens, engaging in a new line of business, selling certain assets, acquiring, consolidating with, or merging with or into other companies and entering into transactions with affiliates. The Phase II Credit Agreement is non-recourse to the Company and our other subsidiariessubsidiaries. The digital cinema projection systems that CDF2CDF 2 partially finances by borrowing under the Phase II Credit Agreement are acquired directly from the manufacturers and are sold to and leased back by CDF2CDF 2 Holdings from CHG-Meridian U.S. Finance, Ltd. (“CHG”) pursuant to a Master Lease Agreement and related documents (the “CHG Lease”). The CHG Lease contains certain restrictive covenants that restrict CDF2 Holdings from, among other things, (with certain specified exceptions) incurring liens on the leased digital cinema systems and from (with certain specified exceptions) subleasing, assigning, modifying or altering such systems. The CHG Lease is non-recourse to the Company and our other subsidiaries. CDF2CDF 2 is not consolidated by the Company, as the Company does not exercise control over CDF2,CDF 2, the lease equity to finance the systems is provided by an unaffiliated third party, and the Company's risk is limited to our initial investment and revenues that could be earned under the management services agreement.agreement (which revenues have, as mentioned above, been assigned to DC Holdings LLC).


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We face the risks of doing business in new and rapidly evolving markets and may not be able successfully to address such risks and achieve acceptable levels of success or profits.

We have encountered and will continue to encounter the challenges, uncertainties and difficulties frequently experienced in new

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and rapidly evolving markets, including:
•Ÿlimited operating experience;
•Ÿnet losses;
•Ÿlack of sufficient customers or loss of significant customers;
•Ÿa changing business focus; and
•Ÿdifficulties in managing potentially rapid growth.

If we do not respond to future advances in technology and changes in customer demands, our financial position, prospects and results of operations may be adversely affected.
The demand for our entertainment software will be affected, in large part, by future advances in technology and changes in customer demands. Our success will also depend on our ability to address the increasingly sophisticated and varied needs of our existing and prospective customers.

We expect competition to be intense: if we are unable to compete successfully, our business and results of operations will be seriously harmed.
The markets for the digital cinema business and the content marketing business are competitive, evolving and subject to rapid technological and other changes. We expect the intensity of competition in each of these areas to increase in the future. Companies willing to expend the necessary capital to create facilities and/or software similar to ours may compete with our business. Increased competition may result in reduced revenues and/or margins and loss of market share, any of which could seriously harm our business. In order to compete effectively in each of these fields, we must differentiate ourselves from competitors.

Many of our current and potential competitors have longer operating histories and greater financial, technical, marketing and other resources than us,we do, which may permit them to adopt aggressive pricing policies. As a result, we may suffer from pricing pressures that could adversely affect our ability to generate revenues and our results of operations. Many of our competitors also have significantly greater name and brand recognition and a larger customer base than us. . If we are unable to compete successfully, our business and results of operations will be seriously harmed.

Our plan to acquire additional businesses involves risks, including our inability to successfully complete an acquisition successfully, our assumption of liabilities, dilution of your investment and significant costs.

Strategic and financially appropriate acquisitions are a key component of our growth strategy. Subsequent to the end of the fiscal year ended March 31, 2012, we acquired New Video, an independent home entertainment distributor of quality packaged and digital content that provides distribution services in the DVD, BD, Digital and VOD channels for more than 500 independent rights holders. Although there are no other acquisitions identified by us as probable at this time, we may make further acquisitions of similar or complementary businesses or assets.  Even if we identify appropriate acquisition candidates, we may be unable to negotiate successfully the terms of the acquisitions, finance them, integrate the acquired business into our then existing business and/or attract and retain customers.  We are also subject to limitations on our ability to make acquisitions pursuant to the 2010 Note.  Completing an acquisition and integrating an acquired business may require a significant diversion of management time and resources and involves assuming new liabilities.  Any acquisition also involves the risks that the assets acquired may prove less valuable than expected and/or that we may assume unknown or unexpected liabilities, costs and problems.  If we make one or more significant acquisitions in which the consideration consists of our capital stock, your equity interest in our company could be diluted, perhaps significantly.  If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash, or obtain additional financing to consummate them.

Our previous acquisitions involve risks, including our inability to integrate successfully the new businesses and our assumption of certain liabilities.

We have, subsequent to the end of the fiscal year ended March 31, 2012, made a meaningful acquisition of New Video to expand into the distribution of entertainment content in the ancillary home entertainment markets. We cannot assure you that we will be able to effectively expand and market the services provided by New Video as it is combined into CEG.  Our acquisition of this businessthese businesses and itstheir respective assets also involvesinvolved the risks that the businessbusinesses and assets acquired may prove to be less valuable than we expected and/or that we may assume unknown or unexpected liabilities, costs and problems.  In addition, we assumed certain liabilities in connection with this acquisitionthese acquisitions and we cannot assure you that we will be able to satisfy

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adequately such assumed liabilities.  Other companies that offer similar products and services may be able to market and sell their products and services more cost-effectively than we can.

If we do not manage our growth, our business will be harmed.

We may not be successful in managing our rapid growth. Past growth has placed, and future growth will continue to place, significant challenges on our management and resources, related to the successful integration of the newly acquired businesses. To manage the expected growth of our operations, we will need to improve our existing, and implement new, operational and financial systems, procedures and controls. We may also need to expand our finance, administrative, client services and operations staffs and train

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and manage our growing employee base effectively. Our current and planned personnel, systems, procedures and controls may not be adequate to support our future operations. Our business, results of operations and financial position will suffer if we do not effectively manage our growth.

If we are not successful in protecting our intellectual property, our business will suffer.

We depend heavily on technology to operate our business. Our success depends on protecting our intellectual property, which is one of our most important assets. We have intellectual property consisting of:
•Ÿlicensable software products;
•Ÿrights to certain domain names;
•Ÿregistered service marks on certain names and phrases;
•Ÿvarious unregistered trademarks and service marks;
•Ÿknow-how;
•Ÿrights to certain logos; and
•Ÿa pending patent application with respect to certain of our software.

If we do not adequately protect our intellectual property, our business, financial position and results of operations would be harmed. Our means of protecting our intellectual property may not be adequate. Unauthorized parties may attempt to copy aspects of our intellectual property or to obtain and use information that we regard as proprietary. In addition, competitors may be able to devise methods of competing with our business that are not covered by our intellectual property. Our competitors may independently develop similar technology, duplicate our technology or design around any intellectual property that we may obtain.

The success of some of our business operations depends on the proprietary nature of certain software. We do not, however, have patents with respect to much of our software. Because there is no patent protection in respect of much of our software, other companies are not prevented from developing and marketing similar software. We cannot assure you, therefore, that we will not face more competitors or that we can compete effectively against any companies that develop similar software. We also cannot assure you that we can compete effectively or not suffer from pricing pressure with respect to our existing and developing products that could adversely affect our ability to generate revenues. Further, our pending patent application may not be issued and if issued may not be broad enough to protect our rights, or if such patent is issued such patent could be successfully challenged.

Although we hold rights to various web domain names, regulatory bodies in the United States and abroad could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. The relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We may be unable to prevent third parties from acquiring domain names that are similar to or diminish the value of our proprietary rights.

Our substantial non-recourse debt and lease obligations could impair our financial flexibility and restrict our business significantly.

We now have, and will continue to have, significant debt obligations. We had notestotal loans payable to third parties with principal amounts aggregating $258.3237.9 million as of March 31, 20122013, all of which$171.0 million was non-recourse and not guaranteed by the Company or our subsidiaries, other than CDF I with respect to the Phase I Credit Agreement, DC Holdings LLC, AccessDM and ADCP2 with respect to the Prospect Loan, Phase 2 B/AIX with respect to the KBC Agreements and CDF2 Holdings and CDF 2 with respect to the KBC Agreements.Phase II Credit Agreement and CHG Lease. The Company provides limited financial support to the Prospect Loan not to exceed $1.5 million per year in the event financial performance does not meet certain defined benchmarks. The Company would not have been required to provide any support in fiscal year 2013 if the Prospect Loan had been outstanding for the full year.

We also had a capital lease obligationsobligation covering facilitiesa facility with an aggregate principal amountsamount of $5.4$4.5 million as of March 31, 20122013. In May 2011, the Company completed the sale of certain assets and liabilities of the Pavilion Theatre and from that point forward, it has not been operated by the Company. The Company has remained the primary obligatorobligor on the Pavilion capital lease and therefore, the capital lease obligation which aggregates $5.4 million, and the related assets under the capital lease continue to

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remain with the Company as of March 31, 20122013. The Company has, however, entered into a sub-lease agreement with the unrelated third party purchaser who makes all payments related to the lease and as such, the Company has no continuing involvement in the operation of the Pavilion Theatre.


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In May 2010, we amended and restatedFebruary 2013, DC Holdings LLC, our wholly-owned subsidiary, entered into the 2010 NoteProspect Loan in the aggregate principal amount of $75.0 million (which was originally issued$70.0 million. Additionally, in August 2009). Additionally,February 2013, CDF I, our indirect wholly-owned subsidiary that is intended to be a special purpose, bankruptcy remote entity, has entered intoamended and restated the Phase I Credit Agreement, pursuant to which it borrowed $172.5 million. As$130 million of March 31, 2012, the outstanding principal balance under the Phase I Credit Agreementwhich $5.0 million was $117.6 million.assigned to DC Holding LLC. Phase 2 B/AIX, our indirect wholly-owned subsidiary, has entered into the KBC Agreements pursuant to which it has borrowed $61.9$63.1 million in the aggregate. As of March 31, 20122013,the outstanding principal balance under the KBC Agreements was $52.344.3 million in the aggregate.

The obligations and restrictions under the 2010 Note,Prospect Loan, the Phase I Credit Agreement, the KBC Agreements and our other debt obligations could have important consequences for us, including:
•Ÿlimiting our ability to obtain necessary financing in the future; and
•Ÿrequiring us to dedicate a substantial portion of our cash flow to payments on our debt obligations, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements or expansion of our business;
•limiting our ability to pay dividends to our shareholders; and
•placing us at a competitive disadvantage compared to competitors that might have stronger balance sheets or better access to capital by, for example, limiting our ability to enter into new markets.business.

CDF 2 and CDF2 Holdings are our indirect wholly-owned, non-consolidated VIEs that are intended to be special purpose, bankruptcy remote entities. CDF 2 has entered into the Phase II Credit Agreement, pursuant to which it may borrow up to $77.5borrowed $63.2 million in the aggregate. As of March 31, 20122013, the outstanding principal balance under the Phase II Credit Agreement, which includes interest payable, was $36.2$59.7 million. CDF2 Holdings has entered into the CHG Lease pursuant to which CHG has committed to provideprovided sale/leaseback financing for digital cinema projection systems that arewere partially financed by the Phase II Credit Agreement in an amount up toof approximately $23.1$57.2 million in the aggregate. As of March 31, 2012, CHG had provided approximately $26.3 million of sale/leaseback financing for such digital cinema projection systems.  These facilities are non-recourse to the Company and our subsidiaries, excluding the Company's VIE,VIEs,  CDF 2 and CDF2 Holdings, as the case may be. Although the Phase II financing arrangements undertaken by CDF 2 and CDF 2 Holdings are important to the Company with respect to the success of its Phase II Deployment, the Company’sCompany's financial exposure related to the debt of CDF 2 and CDF 2CDF2 Holdings is limited to the $2$2.0 million initial investment it made into CDF 2 and CDF 2CDF2 Holdings. As of March 31, 2012,2013, the book value of this investment was approximately $1.5 million.$1.8 million.

The obligations and restrictions under the Phase II Credit Agreement and the CHG Lease could have important consequences for CDF 2 and CDF 2CDF2 Holdings, including:
•ŸLimiting their ability to obtain necessary financing in the future; and
•Ÿrequiring them to dedicate a substantial portion of their cash flow to payments on their debt obligations, thereby reducing the availability of their cash flow for other uses; and
•limiting our ability to pay dividends to our shareholders.uses.

If we are unable to meet our lease and non-recourse debt obligations, we could be forced to restructure or refinance our obligations, to seek additional equity financing or to sell assets, which we may not be able to do on satisfactory terms or at all. As a result, we could default on those obligations and in the event of such default, our lenders could accelerate our debt or take other actions that could restrict our operations.

The foregoing risks would be intensified to the extent we borrow additional money or incur additional debt.

The agreements governing the financing of our Phase I Deployment and part of our Phase II Deployment and our issuance of the 2010 NoteProspect Loan impose certain limitations on us.

The Phase I Credit Agreement governing the financing of our Phase I Deployment restricts the ability of CDF I and its existing and future subsidiaries to, among other things:

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•Ÿmake certain capital expenditures and investments;
•Ÿincur other indebtedness or liens;
•Ÿengage in a new line of business;
•Ÿsell assets;
•pay dividends or make distributions to shareholders;
•Ÿacquire, consolidate with, or merge with or into other companies; and
•Ÿenter into transactions with affiliates.

One or more of the KBC Agreements governing part of the financing of our Phase II Deployment restrict the ability of Phase 2 B/AIX to, among other things:

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•Ÿdispose of or incur other liens on the digital cinema projection systems financed by KBC;
•Ÿengage in a new line of business;
•Ÿsell assets outside the ordinary course of business or on other than arm’sarm's length terms;
•Ÿmake payments to majority owned affiliated companies; and
•Ÿconsolidate with, or merge with or into other companies.

The agreements governing the 2010 NoteProspect Loan restrict the ability of the CompanyDC Holdings LLC and its subsidiaries, subject to certain exceptions, to, among other things:
•Ÿmake certain capital expenditures and investments;
Ÿincur other indebtedness or liens;
•Ÿcreate or acquire subsidiaries which do not guarantee the notes;engage in a new line of business;
•Ÿmake certain investments;sell assets;
•Ÿamend certain agreements;
•pay dividends;acquire, consolidate with, or merge with or into other companies; and
•Ÿmodify authorized capital.
enter into transactions with affiliates.


The agreements governing the financing of other parts of our Phase II Deployment impose certain limitations which may affect our Phase 2 deployment.

The Phase II Credit Agreement governing part of the financing of part of our Phase II Deployment that has not been financed by the KBC Agreements restricts the ability of CDF 2, CDF2 Holdings and itstheir existing and future subsidiaries to, among other things:
•Ÿmake certain capital expenditures and investments;
•Ÿincur other indebtedness or liens;
•Ÿengage in a new line of business;
•Ÿsell assets;
•pay dividends or make distributions to shareholders;
•Ÿacquire, consolidate with, or merge with or into other companies; and
•Ÿenter into transactions with affiliates.
The CHG Lease governing part of the financing of part of our Phase II Deployment restricts the ability of CDF2 Holdings to, among other things:
•Ÿincur liens on the digital cinema projection systems financed; and
•Ÿsublease, assign or modify the digital cinema projection systems financed.

We may not be able to generate the amount of cash needed to fund our future operations.

Our ability either to make payments on or to refinance our indebtedness, or to fund planned capital expenditures and research and development efforts, will depend on our ability to generate cash in the future.  Our ability to generate cash is in part subject to general economic, financial, competitive, regulatory and other factors that are beyond our control.

Based on our current level of operations, we believe our cash flow from operations, subsequent borrowings and Credit

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Agreementloan and credit agreement terms will be adequate to meet our future liquidity needs through at least March 31, 2014, 2013..  Significant assumptions underlie this belief, including, among other things, that there will be no material adverse developments in our business, liquidity or capital requirements.  If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as:

•reducing capital expenditures;
•reducing research and development efforts;
•selling assets;
•restructuring or refinancing our remaining indebtedness; and
•seeking additional funding.
Ÿreducing capital expenditures;
Ÿreducing research and development efforts;
Ÿselling assets;
Ÿrestructuring or refinancing our remaining indebtedness; and
Ÿseeking additional funding.


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We cannot assure you, however, that our business will generate sufficient cash flow from operations, or that we will be able to make future borrowings in amounts sufficient to enable us to pay the principal and interest on our current indebtedness or to fund our other liquidity needs.  We may need to refinance all or a portion of our indebtedness on or before maturity.  We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

We have incurred losses since our inception.

We have incurred losses since our inception in March 2000 and have financed our operations principally through equity investments and borrowings.  As of March 31, 20122013, we had negative working capital, defined as current assets less current liabilities, of $3.017.5 million, and cash and cash equivalents investment securities and restricted cash totaling $33.113.4 million; we had an accumulated deficit of $221.0242.5 million and,however during the fiscal year ended March 31, 20122013, we hadgenerated $39.929.4 million of net cash provided byfrom operating activities.  

Our net losses and cash outflows may increase as and to the extent that we increase the size of our business operations, increase the purchases of Systems for Phase 2 DC’s Phase II Deployment, increase our sales and marketing activities, increase our content distribution rights acquisition activities, enlarge our customer support and professional services and acquire additional businesses.  These efforts may prove to be more expensive than we currently anticipate which could further increase our losses.  We must continue to increase our revenues in order to become profitable.  We cannot reliably predict when, or if, we will become profitable.  Even if we achieve profitability, we may not be able to sustain it.  If we cannot generate operating income or positive cash flows in the future, we will be unable to meet our working capital requirements.

Many of our corporate actions may be controlled by our officers, directors and principal stockholders; these actions may benefit these principal stockholders more than our other stockholders.

As of June 11, 2012,March 31, 2013, our directors, executive officers and principal stockholders, those known by the Company to beneficially own more than 5% of the outstanding shares of the Company's Common Stock, beneficially own, directly or indirectly, in the aggregate, approximately 36.9%48% of our outstanding common stock.  In particular, Chris McGurk, our Chairman and Chief Executive Officer, owns 136,055199,615 shares of Class A Common Stock and has stock options to purchase 4,500,000 shares of Class A Common Stock. Such options began vesting in thirds starting in December 2011 and will finish in December 2013. If all the options were exercised, Mr. McGurk would own 4,636,0554,699,615 shares or approximately 8.8% of the then-outstanding Class A Common Stock. Also, Adam Mizel, our Chief Operating Officer and Chief Financial Officer, beneficiallyIn addition, an affiliate of Sageview Capital L.P. (“Sageview”) owns 1,612,861180,395 shares of Class A Common Stock and has stock optionswarrants to purchase 950,00016,000,000 shares of Class A Common Stock.  Of the total stock options, 575,000 will vest in August 2012 and the remaining stock options will vest in fourths continuing in August 2013 and finishing in August 2015.  If all the options were exercised, Mr. Mizel would own 2,562,861 shares or approximately 5.2% of the then-outstanding Class A Common Stock. In addition, Sageview owns warrants to purchase 16,000,000 shares of Class A Common Stock. If such warrants are exercised, Sageview would own approximately 25.0%25.1% of the then-outstanding Class A Common Stock.  Sageview is also currently entitled to nominate two members toLaura Nisonger Sims, a member of our board of directors, (with such nomination right subjectis a principal of Sageview. Based on its ownership if the warrants, Sageview is entitled to reduction or elimination under certain circumstances).have non-voting observers attend our board of directors.
 
These stockholders will have significant influence over our business affairs, with the ability to control matters requiring approval by our security holders, including elections of directors and approvals of mergers or other business combinations.  Also, certain corporate actions directed by our officers may not necessarily inure to the proportional benefit of other stockholders of our company.

Our success will significantly depend on our ability to hire and retain key personnel.

Our success will depend in significant part upon the continued servicesperformance of our senior management personnel and other key technical, sales and senior managementcreative personnel. We do not currently have significant “key person” life insurance policies for any of our employees. We have entered into employment agreements with three of our top executive officers, all of which will terminate within the next 12 months unless renewed. If we lose one or more of our key employees, we may not be able to find a suitable replacement(s) and our business

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and results of operations could be adversely affected. In addition, competition for key employees necessary to create and distribute our entertainment content and software products is intense and may grow in the future. Our future success will also depend upon our ability to hire, train, integrate and retain qualified new employees.

employees and our inability to do so may have an adverse impact upon our business, financial condition, operating results, liquidity and prospects for growth.
If the market price of our common stock declines, we may not be able to maintain our listing on the Nasdaq Global Market which may impair our financial flexibility and restrict our business significantly.

The stock markets have experienced extreme price and volume fluctuations that have affected the market prices of equity securities of many companies that may be unrelated or disproportionate to the operating results of such companies. These broad market movements may adversely affect the market price of the common stock. The common stock is presently listed on Nasdaq. Although we are not currently in jeopardy of delisting, we cannot assure you that we will meet the criteria for continued listing and our common stock could become delisted. Any such delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the loss of confidence in our financial stability by suppliers, customers and employees. If the common stock is delisted from Nasdaq, we may face a lengthy process to re-list the common stock, if we are able to re-list the common stock at all, and the liquidity that Nasdaq provides will no longer be available to investors.

If the common stock were to be delisted from Nasdaq, it could, under certain circumstances, be deemed to be a change of control in the Company and, as a result, the holders of the 2010 Note would have the right to require the Company redeem the outstanding principal of the 2010 Note. As a result, we could be forced to restructure or refinance our obligations, to seek additional equity financing or to sell assets, which we may not be able to do on satisfactory terms or at all. If we default under the 2010 Note obligations, our lenders could take actions that would restrict our operations.
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While we believe we currently have effective internal control over financial reporting, we are required to assess our internal control over financial reporting on an annual basis and any future adverse results from such assessment could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.
Section 404 of the Sarbanes-Oxley Act of 2002 and the accompanying rules and regulations promulgated by the SEC to implement it required us to include in our Form 10-K annual reports by our management and independent auditors regarding the effectiveness of our internal control over financial reporting. The reportsreport included, among other things, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year. These assessmentsThe assessment did not result in the disclosure of any material weaknesses in our internal control over financial reporting identified by management. During this process, if our management identified one or more material weaknesses in our internal control over financial reporting that cannot be remediated in a timely manner, we would not be unable to assert such internal control as effective. While we currently believe our internal control over financial reporting is effective, the effectiveness of our internal controls in future periods is subject to the risk that our controls may become inadequate because of changes in conditions, and, as a result, the degree of compliance of our internal control over financial reporting with the applicable policies or procedures may deteriorate. If, in the future, we are unable to conclude that our internal control over financial reporting is effective (or if our independent auditors disagree with our conclusion), we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.

New technologiesIf we do not respond to future advances in technology and changes in customer demands, our financial position, prospects and results of operations may make our Digital Cinema Assets less desirable to motion picture studios or exhibitors of digital content and result in decreasing revenues.be adversely affected.
The demand for our Systems and other assets in connection with our digital cinema business (collectively, our “Digital Cinema Assets”) may be affected by future advances in technology and changes in customer demands. We cannot assure you that there will be continued demand for our Digital Cinema Assets. Our profitability depends largely upon the continued use of digital presentations at theatres. Although we have entered into long term agreements with major motion picture studios and independent studios (the “Studio Agreements”), there can be no assurance that these studios will continue to distribute digital content to movie theatres. If the development of digital presentations and changes in the way digital files are delivered does not continue or technology is used that is not compatible with our Systems, there may be no viable market for our Systems.Systems and related products. Any reduction in the use of our Systems and related products resulting from the development and deployment of new technology may negatively impact our revenues and the value of our Systems.

The demand for our entertainment software will be affected, in large part, by future advances in technology and changes in customer demands. Our success will also depend on our ability to address the increasingly sophisticated and varied needs of our existing and prospective customers.

We have concentration in our business with respect to our major motion picture studio customers, and the loss of one or more of our largest studio customers could have a material adverse effect on us.

Our Studio Agreements account for a significant portion of our revenues.  Together these studios generated 52%63%, 59%56%, 17%8%, 21%25% and 40%45% of Phase 1 DC’s,DC's, Phase 2 DC’s, Software’s,DC's, Software's, the Services segment’s,segment's, and our consolidated revenues, respectively,

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for the fiscal year ended March 31, 20122013.
 
The Studio Agreements are critical to our business.  If some of the Studio Agreements were terminated prior to the end of their terms or found to be unenforceable, or if our Systems are not upgraded or enhanced as necessary, or if we had a material failure of our Systems, it may have a material adverse effect on our revenue, profitability, financial condition and cash flows.  The Studio Agreements also generally provide that the VPF rates and other material terms of the agreements may not be more favorable to one studio as compared to the others.

Termination of the MLAs and MLAAs could damage our revenue and profitability.

The master license agreements with each of our licensed exhibitors (the “MLAs”) are critical to our business as are master license administrative agreementagreements (the "MLAAs"). The MLAs each have a termterms which expiresexpire in 2020 through 2022 and provide the exhibitor with an option to purchase our Systems or to renew for successive one year periods up to ten years thereafter. The MLAs also require our suppliers to upgrade our Systems when technology necessary for compliance with DCI Specification becomes commercially available and we may determine to enhance the Systems which may require additional capital expenditures.  If any one of the MLAs were terminated prior to the end of its term, not renewed at its expiration or found to be unenforceable, or if our Systems are not upgraded or enhanced as necessary, it would have a material adverse effect on our revenue, profitability, financial condition and cash flows. Additionally, termination of MLAA'sMLAAs could adversely impact our servicing business.


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We have concentration in our business with respect to our major licensed exhibitors, and the loss of one or more of our largest exhibitors could have a material adverse effect on us.

Over 58%57% of Phase 1 DC’sDC's Systems and 21%18% of total systems are under MLA in theatres owned or operated by one large exhibitor.  The loss of this exhibitor or another of our major licensed exhibitors could have a negative impact on the aggregate receipt of VPF revenues as a result of the loss of any associated MLAs.  Although we do not receive revenues from licensed exhibitors and we have attempted to limit our licenses to only those theatres which we believe are successful, each MLA with our licensed exhibitors is important, depending on the number of screens, to our business since VPF revenues are generated based on screen turnover at theatres.  If the MLA with a significant exhibitor was terminated prior to the end of its term, it would have a material adverse effect on our revenue, profitability, financial condition and cash flows.  There can be no guarantee that the MLAs with our licensed exhibitors will not be terminated prior to the end of its term.

We depend on a limited number of suppliers for our Systems, and any delay in supply could affect our ability to grow.
We currently purchase Systems from a limited number of suppliers for our Systems in our Phase II Deployment. The inability to obtain certain components on a timely basis would limit our ability to complete installation of such Systems in a timely manner and would affect the amount of future revenues.

An increase in the use of alternative filmmovie distribution channels and other competing forms of entertainment could drive down movie theatre attendance, which, if causing significant theatre closures or a substantial decline in motion picture production, may lead to reductions in our revenues.
Various exhibitor chains which are the Company’sCompany's distributors face competition for patrons from a number of alternative motion picture distribution channels, such as DVD, network and syndicated television, video on-demand, pay-per-view television and downloading utilizing the internet.Internet. These exhibitor chains also compete with other forms of entertainment competing for patrons’patrons' leisure time and disposable income such as concerts, amusement parks and sporting events. An increase in popularity of these alternative filmmovie distribution channels and competing forms of entertainment could drive down movie theatre attendance and potentially cause certain of our exhibitors to close their theatres for extended periods of time. Significant theatre closures could in turn have a negative impact on the aggregate receipt of our VPF revenues, which in turn may have a material adverse effect on our business and ability to service our debt.

An increase in the use of alternative filmmovie distribution channels could also cause the overall production of motion pictures to decline, which, if substantial, could have an adverse effect on the businesses of the major studios with which we have Studio Agreements. A decline in the businesses of the major studios could in turn force the termination of certain Studio Agreements prior to the end of their terms. The Studio Agreements with each of the major studios are critical to our business, and their early termination may have a material adverse effect on our revenue, profitability, financial condition and cash flows.


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The acquisition restrictions contained in our certificate of incorporation and our Tax Benefit Preservation Plan, which are intended to help preserve our net operating losses, may not be effective or may have unintended negative effects.

We have experienced, and may continue to experience, substantial operating losses, and under Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), and rules promulgated by the Internal Revenue Service, we may “carry forward” these net operating losses (“NOLs”) in certain circumstances to offset any current and future earnings and thus reduce our federal income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs do not otherwise become limited, we believe that we will be able to carry forward a significant amount of the NOLs, and therefore these NOLs could be a substantial asset to us. If, however, we experience a Section 382 ownership change, our ability to use the NOLs will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of that asset.

To reduce the likelihood of an ownership change, we have established acquisition restrictions in our certificate of incorporation and our board of directors (the “Board”) adopted a tax benefit preservation plan (the “Tax Benefit Preservation Plan”). The Tax Benefit Preservation Plan is designed to protect shareholder value by attempting to protect against a limitation on our ability to use our existing NOLs.incorporation. The acquisition restrictions in our certificate of incorporation are also intended to restrict certain acquisitions of our common stock to help preserve our ability to utilize our NOLs by avoiding the limitations imposed by Section 382 and the related Treasury regulations. The acquisition restrictions and the Tax Benefit Preservation Plan are generally designed to restrict or deter direct and indirect acquisitions of our common stock if such acquisition would result in a shareholder becoming a “5-percent shareholder” (as defined by Section 382 and the related Treasury regulations) or increase the percentage ownership of CinedigmCompany stock that is treated as owned by an existing 5-percent shareholder.

Although the acquisition restrictions and the Tax Benefit Preservation Plan are intended to reduce the likelihood of an ownership change that could adversely affect us, we can give no assurance that such restrictions would prevent all transfers that could result in such an ownership change. In particular, we have been advised by our counsel that, absent a court determination, there can be no assurance that the acquisition restrictions will be enforceable against all of our shareholders, and that they may be subject to challenge on equitable grounds. In particular, it is possible that the acquisition restrictions may not be enforceable against the shareholders who voted against or abstained from voting on the restrictions at our 2009 annual meeting of stockholders.


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Under certain circumstances, our Board may determine it is in the best interest of the Company to exempt certain 5-percent shareholders from the operation of the acquisition restrictions, or the Tax Benefit Preservation Plan, if a proposed transaction is determined not to be detrimental to the Company’sCompany's utilization of its NOLs.

The acquisition restrictions and Tax Benefit Preservation Plan also require any person attempting to become a holder of 5% or more of our common stock, as determined under Section 382, to seek the approval of our Board. This may have an unintended “anti-takeover” effect because our Board may be able to prevent any future takeover. Similarly, any limits on the amount of stock that a stockholder may own could have the effect of making it more difficult for stockholders to replace current management. Additionally, because the acquisition restrictions and the Tax Benefit Preservation Plan have the effect of restricting a stockholder’sstockholder's ability to dispose of or acquire our common stock, the liquidity and market value of our Class A common stock might suffer. The Tax Benefit Preservation Plan will remain in effect until the earlier of (a) August 10, 2012, or (b) such other date as our Board in good faith determines it is no longer in the best interests of Cinedigm and its stockholders. The acquisition restrictions may be waived by our Board. Stockholders are advised to monitor carefully their ownership of our common stock and consult their own legal advisors and/or CinedigmCompany to determine whether their ownership of our common stock approaches the proscribed level.
 
The occurrence of various events may adversely affect the ability of the Company to fully utilize NOLs.

The Company has a substantial amount of NOLs for U.S. federal income tax purposes that are available both currently and in the future to offset taxable income and gains. Events outside of our control may cause us to experience a Section 382 ownership change, and limit our ability to fully utilize such NOLs.

In general, an ownership change occurs when, as of any testing date, the percentage of stock of a corporation owned by one or more “5-percent shareholders,” as defined in the Section 382 and the related Treasury regulations, has increased by more than 50 percentage points over the lowest percentage of stock of the corporation owned by such shareholders at any time during the three-year period preceding such date. In general, persons who own 5% or more of a corporation’scorporation's stock are 5-percent shareholders, and all other persons who own less than 5% of a corporation’scorporation's stock are treated, together, as a single, public group 5-percent shareholder, regardless of whether they own an aggregate of 5% or more of a corporation’scorporation's stock. If a corporation experiences an ownership change, it is generally subject to an annual limitation, which limits its ability to use its NOLs to an amount equal to the equity value of the corporation multiplied by the federal long-term tax-exempt rate.

If we were to experience an ownership change, we could potentially have, in the future, higher U.S. federal income tax

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liabilities than we would otherwise have had and it may also result in certain other adverse consequences to us. Therefore, we have adopted the Tax Benefit Preservation Plan and the acquisition restrictions set forth in Article Fourth of our certificate of incorporation in order to reduce the likelihood that we will experience an ownership change under Section 382. There can be no assurance, however, that these efforts will deter or prevent the occurrence of an ownership change and the adverse consequences that may arise therefrom, as described above under the risk factor titled “The acquisition restrictions contained in our certificate of incorporation, and our Tax Benefit Preservation Plan, which are intended to help preserve our net operating losses, may not be effective or may have unintended negative effects.”

Our revenues and earnings are subject to market downturns.

Our revenues and earnings may fluctuate significantly in the future. General economic or other conditions could cause lower than expected revenues and earnings within our digital cinema, technology or content and entertainment businesses. The global economic turmoil of recent years has caused a downturngeneral tightening in the market for our Systems or technology. Financialcredit markets, lower levels of liquidity, increases in the United Statesrates of default and aroundbankruptcy, an unprecedented level of intervention from the world experienced extreme disruption in the second half of 2008U.S. federal government and much of 2009, including, among other things,foreign governments, decreased consumer confidence, overall slower economic activity and extreme volatility in security prices, severely diminished liquiditycredit, equity and credit availability, ratings downgradesfixed income markets. While the ultimate outcome of certain investments and declining values of others. The global economy wasthese events cannot be predicted, a decrease in a recession. In 2010, the global economy began a gradual recovery from the significant downturneconomic activity in the second halfU.S. or in other regions of 2008the world in which we do business could adversely affect demand for our movies, thus reducing our revenue and all of 2009, which continued in 2011 and is expected to continue at a gradual pace in 2012 and 2013.earnings. While stabilization appears to have begun,has continued, it isremains a slow process and the global economy remains fragile. However, thesubject to volatility. Moreover, financial industry disruptioninstitution failures may result in the inabilitycause us to incur increased expenses or make it more difficult either to financing of our studios, exhibitorsany future acquisitions, or other customers to obtain credit to finance operations; a slowdown in global economies which could result in lower consumer demand for films; counterparty failures negatively impacting our interest rate swaps; or increased impairments of our assets. The current volatility in the financial markets and overall economic uncertainty increase the risk of substantial quarterly and annual fluctuations in our earnings.financing activities. Any of these factors could have a material adverse effect on our business, results of operations and could result in significant additional dilution to shareholders.

Economic conditions could materially adversely affect the Company.

The Company’sCompany's operations and performance could be influenced by worldwide economic conditions.  Uncertainty about current global economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for the Company’sCompany's products and services.  Other factors that could influence demand include continuing increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors affecting consumer spending behavior.  These and other economic factors could have a material adverse effect on demand for the Company’sCompany's products and services and on the Company’sCompany's financial condition and

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operating results.  Uncertainty about current global economic conditions could also continue to increase the volatility of the Company’sCompany's stock price.
 
The continued threat of terrorism and ongoing military and other actions may result in decreases in our net income, revenue and assets under management and may adversely affect our business.

The continued threat of terrorism, both within the United States of America and abroad, and the ongoing military and other actions and heightened security measures in response to these types of threats, may cause significant volatility and declines in the capital markets in the United States of America, Europe and elsewhere, loss of life, property damage, additional disruptions to commerce and reduced economic activity.  An actual terrorist attack could cause losses from a decrease in our business.

The war on terrorism, the threat of additional terrorist attacks, the political and the economic uncertainties that may result and other unforeseen events may impose additional risks upon and adversely affect the cinema industry and our business.  We cannot offer assurances that the threats of future terrorist-like events in the United States of America and abroad or military actions by the United States of America will not have a material adverse effect on our business, financial condition or results of operations.


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Changes to existing accounting pronouncements or taxation rules or practices may affect how we conduct our business and affect our reported results of operations.

New accounting pronouncements or tax rules and varying interpretations of accounting pronouncements or taxation practice have occurred and may occur in the future. A change in accounting pronouncements or interpretations or taxation rules or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. Changes to existing rules and pronouncements, future changes, if any, or the questioning of current practices or interpretations may adversely affect our reported financial results or the way we conduct our business.


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ITEM 2.  PROPERTY

Our segments operated from the following leased properties at March 31, 20122013.

Deployment
Operations of:Location:Facility Type:Expires:Square Feet:
Phase 1 DC (1)    
Phase 2 DC (1)    

Services
Operations of:Location:Facility Type:Expires:Square Feet:
SoftwareAuburn Hills, MichiganAdministrative officesDecember 2011 (4)(2)1,203
 Woodland Hills, CaliforniaAdministrative and technical officesMay 2016 (5)(3)6,726

Content & Entertainment
Operations of:Location:Facility Type:Expires:Square Feet:
CEGCentury City, CaliforniaAdministrative officesJanuary 2017 (6)10,623

Manhattan Borough of New York CityExecutive and administrative officesApril 2016 (8)10,62311,200
  
Corporate
Operations of:Location:Facility Type:Expires:Square Feet:
CinedigmMorristown,Manhattan Borough of New JerseyYork CityExecutive and administrative offices
August
 2012
April 2016		5,23711,200

Assets held for sale and discontinuedDiscontinued operations
Operations of:Location:Facility Type:Expires:Square Feet:
Pavilion TheatreBrooklyn Borough of New York CityNine-screen digital movie theatre
July
2022 (6)(4)
31,120
Data Center (9)(7)Brooklyn Borough of New York CityIDC facility
January
2016 (7)(5)
30,520
DMSChatsworth, CaliforniaAdministrative offices, technical operations center, and warehouse (2)
July
2012 (3)
13,455

(1)Employees share office space with SoftwareCEG in Woodland Hills, California.Century City, California and New York, New York.
(2)Location contains a data center which we use as a dedicated digital content delivery site.
(3)The Company will no longer be obligated under the terms of the lease in July 2012.
(4)Lease has an option to renew for up to an additional five years, which the Company has exercised since the expiration of the lease, with 180 days prior written notice at 95% of the then prevailing market rental rate.
(5)(3)Lease commenced in May 2011.
(6)(4)There is no lease renewal provision.  To date, no additional rent has been paid.  In May 2011, the Company completed the sale of certain assets and liabilities of the Pavilion Theatre and from that point forward, will not be operated by the Company. The Company has remained the primary obligor on the Pavilion capital lease and entered into a separate sublease agreement with the third party to sublet the Pavilion Theatre.
(7)(5)There is no lease renewal provision.
(8)(6)Sublease commenced April 2012. In addition to CEG, various departments within the Company also occupy space at this location.
(9)(7)
Since May 1, 2007, the IDC facility has been operated by FiberMedia, consisting of unrelated third parties,pursuant to a master collocation agreement. The remaining operatingFiberMedia currently pays the lease agreement for one IDCdirectly to the landlord and the Company will attempt to obtain landlord consent to assign the facility lease now operated and paid for by FiberMedia,to FiberMedia.  Until such landlord consent is obtained, the Company will remain as the lessee.
(8)Leased property assumed following the acquisition of New Video in April 2012.


2221


consisting of unrelated third parties.  FiberMedia currently pays the lease directly to the landlord and the Company will attempt to obtain landlord consent to assign the facility lease to FiberMedia.  Until such landlord consents are obtained, the Company will remain as the lessee.

We believe that we have sufficient space to conduct our business for the foreseeable future.  All of our leased properties are, in the opinion of our management, in satisfactory condition and adequately covered by insurance.

We do not own any real estate or invest in real estate or related investments.

ITEM 3.  LEGAL PROCEEDINGS

We are not party to any pending, threatened or contemplated litigation.

ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.




2322


PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

CLASS A COMMON STOCK

Our Class A Common Stock trades publicly on the Nasdaq Global Market (“NASDAQ”), under the trading symbol “CIDM”. The following table shows the high and low sales prices per share of our Class A Common Stock as reported by NASDAQ for the periods indicated:
For the Fiscal Years Ended March 31,For the Fiscal Years Ended March 31,
2012 20112013 2012
HIGH LOW HIGH LOWHIGH LOW HIGH LOW
April 1 – June 30$2.49
 $1.65
 $3.24
 $1.26
$1.80
 $1.32
 $2.49
 $1.65
July 1 – September 30$2.03
 $1.10
 $1.94
 $1.17
$1.52
 $1.11
 $2.03
 $1.10
October 1 – December 31$1.74
 $1.03
 $1.80
 $1.25
$1.58
 $1.22
 $1.74
 $1.03
January 1 – March 31$2.20
 $1.34
 $2.08
 $1.35
$1.73
 $1.30
 $2.20
 $1.34
The last reported closing price per share of our Class A Common Stock as reported by NASDAQ on March 31, 2012June 10, 2013 was $1.69$1.52 per share.  As of March 31, 2012,June 10, 2013, there were 120104 holders of record of our Class A Common Stock, not including beneficial owners of our Class A Common Stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.

CLASS B COMMON STOCK

There is no public trading market for our Class B common stock (“Class B Common Stock”).  Each outstanding share of Class B Common Stock may be converted into one share of Class A Common Stock at any time, and from time to time, at the option of the holder and the holder of Class B Common Stock is entitled to ten (10) votes for each share of Class B Common Stock held.  As of March 31,On April 26, 2012,, there was one the holder of our25,000 shares of the Company's Class B common stock converted all of the Class B shares into 25,000 Class A common stock shares. Accordingly the Company no longer has any Class B common stock outstanding. On September 13, 2012, after receiving approval of its stockholders at the annual meeting of stockholders held on September 12, 2012, the Company amended its Fourth Amended and Restated Certificate of Incorporation to eliminate any authorized but unissued shares of Class B Common Stock. Accordingly, no further Class B Common Stock will be issued.

DIVIDEND POLICY
 
We have never paid any cash dividends on our Class A Common Stock or Class B Common Stock (together, the “Common Stock”) and do not anticipate paying any on our Class A Common Stock in the foreseeable future. Any future payment of dividends on our Class A Common Stock will be in the sole discretion of our board of directors (the “Board”).directors. The holders of our Series A 10% Non-Voting Cumulative Preferred Stock are entitled to receive dividends. Prior to September 2010, the Company was prohibited under the terms of the 2010 Notea term loan with Sageview to make such payments. There were $67$90 of cumulative dividends in arrears on the Preferred Stock at March 31, 20122013.
 
SALES OF UNREGISTERED SECURITIES
 
None.
  
PURCHASE OF EQUITY SECURITIES

There were no purchases of shares of our Class A Common Stock made by us or on our behalf during the three months ended March 31, 20122013.  We do not anticipate purchasing any shares of our Class A Common Stock in the foreseeable future.


2423


ITEM 6.  SELECTED FINANCIAL DATA

The following tables set forth our historical selected financial and operating data for the periods indicated. The selected financial and operating data should be read together with the other information contained in this document, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 7 and the audited historical financial statements and the notes thereto included elsewhere in this document.  The historical results here are not necessarily indicative of future results.
For the Fiscal Years Ended March 31,For the Fiscal Years Ended March 31,
Statement of Operations Data(In thousands, except for share and per share data)(In thousands, except for share and per share data)
Related to Continuing Operations:2012 2011 2010 2009 20082013 2012 2011 2010 2009
Revenues$76,557
 $58,439
 $50,464
 $52,096
 $47,429
$88,080
 $76,557
 $58,439
 $50,464
 $52,096
Direct operating (exclusive of depreciation and amortization shown below)7,042
 4,329
 5,004
 5,960
 4,958
12,489
 7,042
 4,329
 5,004
 5,960
Selling, general and administrative15,717
 11,777
 9,942
 10,589
 12,009
23,123
 15,717
 11,777
 9,942
 10,589
Provision for doubtful accounts459
 144
 (95) (110) 291
490
 459
 144
 (95) (110)
Research and development175
 256
 130
 152
 146
144
 175
 256
 130
 152
Merger and acquisition costs1,267
 604
 —
 —
 —
Restructuring and transition expenses1,207
 1,403
 —
 —
 —
340
 1,207
 1,403
 —
 —
Merger and acquisition costs604
 —
 —
 —
 —
Depreciation and amortization of property and equipment35,865
 31,916
 29,834
 28,934
 24,479
36,498
 35,865
 31,916
 29,834
 28,934
Amortization of intangible assets294
 333
 348
 612
 1,317
1,565
 294
 333
 348
 612
Total operating expenses61,363
 50,158
 45,163
 46,137
 43,200
75,916
 61,363
 50,158
 45,163
 46,137
Income from operations15,194
 8,281
 5,301
 5,959
 4,229
12,164
 15,194
 8,281
 5,301
 5,959

 

 

 

 

         
Interest income140
 154
 312
 367
 1,401
48
 140
 154
 312
 367
Interest expense – cash portion(27,465) (24,581) (30,649) (21,693) (20,959)(26,244) (27,465) (24,581) (30,649) (21,693)
Interest expense – non-cash, includes accretion of note payable discount(2,434) (2,410) (2,934) (4,745) (6,995)(2,070) (2,434) (2,410) (2,934) (4,745)
Debt refinancing expense—
 —
 —
 —
 (1,122)
Extinguishment of debt—
 (4,448) 10,744
 —
 —
Loss on investment in non-consolidated entity(510) —
 —
 —
 —
Debt prepayment fees(3,725) —
 —
 —
 —
(Loss) gain on extinguishment of notes payable(7,905) —
 (4,448) 10,744
 —
Income (loss) on investment in non-consolidated entity322
 (510) —
 —
 —
Other income (expense), net912
 (433) (570) (366) (2,187)653
 912
 (433) (570) (366)
Change in fair value of warrant liability—
 3,142
 2,994
 —
 —
—
 —
 3,142
 2,994
 —
Change in fair value of interest rate swap200
 (1,326) (8,463) (4,529) —
Net loss from continuing operations$(13,963) $(21,621) $(23,265) $(25,007) $(25,633)
Change in fair value of interest rate derivatives1,231
 200
 (1,326) (8,463) (4,529)
Loss from continuing operations before benefit from income taxes(25,526) (13,963) (21,621) (23,265) (25,007)
Benefit from income taxes4,944
 —
 —
 —
 —
Loss from continuing operations(20,582) (13,963) (21,621) (23,265) (25,007)
Loss from discontinued operations(5,381) (8,237) (6,243) (12,197) (10,054)(484) (5,381) (8,237) (6,243) (12,197)
(Loss) gain on sale of discontinued operations(3,696) 622
 —
 $(164) —
—
 (3,696) 622
 —
 (164)
Net loss$(23,040) $(29,236) $(29,508) $(37,368) (35,687)(21,066) (23,040) (29,236) (29,508) (37,368)
Preferred stock dividends(356) (394) (400) (50) —
(356) (356) (394) (400) (50)
Net loss attributable to common shareholders$(23,396) $(29,630) $(29,908) $(37,418) $(35,687)$(21,422) $(23,396) $(29,630) $(29,908) $(37,418)
Basic and diluted net loss per share from continuing operations$(0.39) $(0.71) $(0.83) $(0.91) $(1.00)$(0.44) $(0.39) $(0.71) $(0.83) $(0.91)
Shares used in computing basic and diluted net loss per share (1)36,259,036
 30,794,102
 28,624,154
 27,476,420
 25,576,787
47,517,167
 36,259,036
 30,794,102
 28,624,154
 27,476,420
 
(1)
For all periods presented, the Company has incurred net losses and, therefore, the impact of dilutive potential common stock equivalents and convertible notes are anti-dilutive and are not included in the weighted shares.

2524


For the Fiscal Years Ended March 31,For the Fiscal Years Ended March 31,
(In thousands)(In thousands)
Balance Sheet Data (At Period End):2012 2011 2010 2009 20082013 2012 2011 2010 2009
Cash and cash equivalents, restricted available-for-sale investments and restricted cash$33,071
 $22,979
 $24,193
 $26,584
 $29,910
$20,199
 $33,071
 $22,979
 $24,193
 $26,584
Working capital$2,957
 $13,713
 $15,589
 $24,400
 $43,347
$(17,497) $2,957
 $13,713
 $15,589
 $24,400
Total assets$290,137
 $307,488
 $297,147
 $322,397
 $377,677
$284,058
 $290,137
 $307,488
 $297,147
 $322,397
Notes payable, non-recourse$170,989
 $192,554
 $173,301
 $195,448
 $210,879
$237,909
 $170,989
 $192,554
 $173,301
 $195,448
Total stockholders' (deficit) equity$(11,473) $1,787
 $11,292
 $38,787
 $68,008
$(17,314) $(11,473) $1,787
 $11,292
 $38,787
Other Financial Data (At Period End):   
  
  
  
     
  
  
Net cash provided by (used in) operating activities$39,938
 $30,075
 $9,948
 $505,100
 $(443)
Net cash (used in) provided by investing activities$(17,315) $(41,067) $(19,394) $490,855
 $(96,855)
Net cash provided by operating activities$29,369
 $39,938
 $30,075
 $9,948
 $33,818
Net cash used in investing activities$(4,250) $(17,315) $(41,067) $(19,394) $(34,236)
Net cash (used in) provided by financing activities$(15,528) $12,646
 $2,712
 $495,654
 $97,577
$(29,514) $(15,528) $12,646
 $2,712
 $(13,409)


26


ITEM 7.  MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our historical consolidated financial statements and the related notes included elsewhere in this document.

This report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “estimates,“ and similar words. Forward-looking statements represent, as of the date of this report, our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us.  These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.  
 
OVERVIEW

Cinedigm Digital Cinema Corp. was incorporated in Delaware on March 31, 2000 (“Cinedigm”, and collectively with its subsidiaries, the “Company”).

Over the past decade, the Company has played a significant role in the digital distribution revolution that continues to transform the media landscape. In addition to its pioneering role in transitioning almost 12,000 movie screens from traditional film prints to digital distribution, the Company continues to advance worldwide cinema modernization with its suite of software products allowing exhibitors and distributors to manage their digital businesses with efficiency, insight and lower costs. And, as a leading distributor of independent content domestically, the Company collaborates with producers and the exhibition community to market, source, curate and distribute quality content to targeted and profitable audiences through (i) theatrical releases, (ii) existing and emerging digital home entertainment platforms, including iTunes, Amazon Prime, Netflix, xBox, Playstation, VOD and (iii) physical goods, including DVD and Blu-ray. The Company's library of over 5,000 physical goods titles and 20,000 digital titles from more than 650 independent rights holders includes award-winning documentaries from Docurama Films®, next-generation independent movies from Flatiron Film Company® and acclaimed independent movies and festival picks through partnerships with the Sundance Institute and Tribeca Film. The Company is a digital cinema services, softwareproud to distribute many Oscar®-nominated movies including “The Invisible War,” “Hell and content marketingBack Again,” “GasLand,” “Waste Land” and distribution company supporting and capitalizing on the conversion of the exhibition industry from film to digital technology and the accelerating shift in the home entertainment market to digital and video-on-demand services from physical goods such as DVDs.  The Company provides a digital cinema platform that combines technology solutions, financial advice and guidance, and software services to content owners and distributors and to movie exhibitors.  Cinedigm leverages this digital cinema platform with a series of business applications that utilize the platform to capitalize on the new business opportunities created by the transformation of movie theatres into networked entertainment centers.  The two main applications provided by Cinedigm include (i) its end-to-end digital entertainment content acquisition, marketing and distribution business focused on the distribution of alternative content and independent film in theatrical and ancillary home entertainment markets; and (ii) its operational, analytical and transaction processing software applications.  Historically, the conversion of an industry from analog to digital has created new revenue and growth opportunities as well as an opening for new players to emerge to capitalize on this technological shift.“Paradise Lost 3: Purgatory.”

The Company reports its financial results in four primary segments as follows: (1) the first digital cinema deployment (“Phase I Deployment”),Deployment, (2) the second digital cinema deployment (“Phase II Deployment”),Deployment, (3) digital cinema services (“Services”)Services and (4) media content and entertainment (“Content & Entertainment”).Entertainment.  The Phase I Deployment and Phase II Deployment segments are the non-recourse, financing vehicles and administrators for the Company's digital cinema equipment (the “Systems”)Systems installed in North American movie theatres nationwide.theatres.  The Services segment provides services, software and support to the Phase I Deployment and Phase II Deployment segments as well as directly to exhibitors and other third party customers.  Included in these services are asset management services for a specified fee via service agreements with Phase I Deployment and Phase II Deployment as well as third party exhibitors as buyers of their own digital cinema equipment; and software license, maintenance and consulting services to Phase I and Phase II Deployment, various other exhibitors, studios and other content organizations.  These services primarily facilitate the conversion from analog to digital cinema and have positioned the Company at what it believes to be the forefront of a rapidly developing industry relating to the distribution and management of digital cinema and other content to theatres and other remote venues worldwide.  The Content &

25


Entertainment segment provides content marketingis a market leader in the three pillars of digital entertainment distribution - aggregation and distribution, servicestheatrical releasing and branded and curated OTT entertainment channels and applications.

In April 2012, the Company issued 7,857,143 shares of Class A common stock at a public offering price of $1.40 per share, resulting in both theatrical and ancillary home entertainment marketsnet proceeds to alternative and independent film content owners and to theatrical exhibitors.the Company of $10.0 million, net of costs of $1.1 million.

On April 20,19, 2012, we acquiredthe Company entered into a stock purchase agreement for the purchase of all of the issued and outstanding capital stock of New Video, Group, Inc. ("New Video"), an independent home entertainment distributor of quality packaged goods entertainment and digital content that provides distribution services in the DVD, BD,Blu-ray, Digital and VOD channels for more than 500 independent rights holders.holders (the “New Video Acquisition”). The Company agreed to pay $10.0 million in cash and 2,525,417 shares of Class A common stock at $1.51 per share, subject to certain transfer restrictions, plus up to an additional $6.0 million in cash or Class A common stock, at the Company’s discretion, if certain business unit financial performance targets are met during the fiscal years ended March 31, 2013, 2014 and 2015. The New Video will be integrated intoAcquisition was consummated on April 20, 2012. Merger and acquisition expenses, consisting primarily of professional fees, directly related to the Company;s Content & Entertainment segment.

DuringNew Video Acquisition totaled $1.9 million, of which $1.3 million was incurred during the fiscal year ended March 31, 2012,2013.

On February 28, 2013, the Company discontinuedsignificantly enhanced its capital structure by closing two new credit facilities which effectively refinanced the non-recourse senior Phase 1 2010 Term Loan and soldrecourse corporate note into two non-recourse loans. These two new non-recourse credit facilities, $125.0 million and $70.0 million respectively, will be supported by the following non-core businesses:

In September 2011, the Company completed the sale of its cinema advertising services business, Unique Screen Media ("USM") to a third party, which was previously included in our Content & Entertainment segment; and
In November 2011, the Company completed the salecash flows of the majority of assets of its Digital Media Services Division (“DMS”) digital distribution and delivery business, which was previously included in our Services segment, to a third party.


27


As a consequence, it was determined that the above former businesses met the criteria for classification as discontinued operations during the respective periods and their respective assets and liabilities met the criteria for classification as “assets held for sale” and “liabilities as part of assets held for sale”, respectively. The consolidated financial statementsPhase 1 deployment and the notes to consolidated financial statements presented herein have been recast solely to reflectCompany’s digital cinema servicing business. These new facilities significantly improve upon the adjustments resulting from these changes in classification. Please see Note 3 to the Consolidated Financial Statements for further information.

In addition to the above, the Company has classified certain of its businesses as discontinued operations, including the motion picture exhibition to the general public (“Pavilion Theatre”), information technology consulting services and managed network monitoring services (“Managed Services”) and hosting services and network access for other web hosting services (“Access Digital Server Assets”), all of which were separate reporting units previously included in our former "Other" segment. In August 2010, the Company sold both Managed Services and the Access Digital Server Assets to third parties. In May 2011, the Company completed the sale of certain assets and liabilitiesterms of the Pavilion Theatreprevious financing arrangements through a combination of (i) reduced borrowing costs, (ii) the issuance of all as debt non-recourse to Cinedigm’s software and content businesses, and (iii) a third party. As a result of the sales, the "Other" segment no longer exists as a reportable segment of the Company.significant maturity extension to 2021.

The following organizational chart provides a graphic representation of our business and our four reporting segments:
 
We have incurred consolidated net losses, including the results of our non-recourse deployment subsidiaries, of $23.421.1 million and $29.623.0 million during the fiscal years ended March 31, 20122013 and 2011,2012, respectively, and we have an accumulated deficit of $221.0242.5 million as of March 31, 2012.2013. Included in our consolidated net losses were $10.8merger and acquisitions and restructuring expenses of $1.3 million and $9.0$0.3 million, respectively, during the fiscal yearsyear ended March 31, 2012 and 2011, respectively, of losses attributed to discontinued operations, asset write-offs related to our assets from discontinued operations, restructuring charges and non-cash loss through our equity investment in CDF2.2013. We also have significant contractual obligations related to our non-recourse debt for the remainder of the fiscal year ended March 31, 20132014 and beyond. We may continue generating consolidated net losses including our non-recourse deployment subsidiaries, for the foreseeable future. Based on our cash position at March 31, 2012,2013, and expected

26


cash flows from operations, we believe that we have the ability to meet our obligations through at least March 31, 2013.2014. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations or liquidity.

28


Critical Accounting Policies

The following is a discussion of our critical accounting policies.

CONSOLIDATION

The Company’s consolidated financial statements include the accounts of Cinedigm, Access Digital Media, Inc. (“AccessDM”), Hollywood Software, Inc. d/b/a Cinedigm Software (“Software”), Core Technology Services, Inc. (“Managed Services”) (sold in August 2010), FiberSat Global Services, Inc. d/b/a Cinedigm Satellite and Support Services (“Satellite”), ADM Cinema Corporation (“ADM Cinema”) d/b/a the Pavilion Theatre (certain assets and liabilities sold in May 2011), Christie/AIX, Inc. d/b/a Cinedigm Digital Cinema (“Phase 1 DC”), USM (sold in September 2011),  Vistachiara Productions, Inc. f/k/a The Bigger Picture, currently d/b/a Cinedigm Content and Entertainment Group  (“CEG”), Access Digital Cinema Phase 2 Corp. (“Phase 2 DC”), Access Digital Cinema Phase 2 B/AIX Corp. (“Phase 2 B/AIX”) and Cinedigm Digital Funding I, LLC (“CDF I”). AccessDM and Satellite are together referred to as the DMS (the majority of which was sold in November, 2011). All intercompany transactions and balances have been eliminated in consolidation.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:

Computer equipment and software3-5 years
Digital cinema projection systems10 years
Machinery and equipment3-10 years
Furniture and fixtures3-6 years

Leasehold improvements are being amortized over the shorter of the lease term or the estimated useful life of the improvement. Maintenance and repair costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized.

Useful lives are determined based on an estimate of either physical or economic obsolescence, or both.  During the fiscal years ended March 31, 20122013 and 20112012, the Company has not made any revisions to estimated useful lives, nor recordedlives. During the fiscal year ended March 31, 2013, the Company reduced its capital lease obligation resulting from an amended sub-lease agreement in January 2013, through which an unrelated third party purchaser pays the capital lease and the Company is the primary obligor. During the fiscal year ended March 31, 2012, the Company did not record any impairment charges from continuing operations on its fixed assets of our continuing operations.property and equipment.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Internal Use Software

The Company accounts for internal use software development costs based on three distinct stages.  The first stage, the preliminary project stage, includes the conceptual formulation, design and testing of alternatives.  The second stage, or the program instruction phase, includes the development of the detailed functional specifications, coding and testing.  The final stage, the implementation stage, includes the activities associated with placing afor software project into service.  All activities included within the preliminary project stage are considered research and development and expensed as incurred.  During the program instruction phase, all costs incurred until the software is substantially complete and ready for use, including all necessary testing, are capitalized, Capitalized costs are amortized when the software is ready for its intended use on a straight-line basis over estimated lives ranging from three to five years.

Software to be Sold, Licensedsold, licensed or Otherwise Marketed

Software development costsotherwise marketed that are incurred subsequent to establishing technological feasibility, when it is determined that the software can be produced to meet its design specifications, are capitalized until the product is available for general release. Amounts capitalized as software development costs are amortized using the greater of revenues during the period compared to the total estimated revenues to be earned or on a straight-line basis over estimated lives, ranging from three togenerally five years, except for deployment software which is for ten years. The Company reviews capitalized software costs to determine if any impairment exists on a periodic basis.  Amortization of capitalized software development costs, included in direct operating costs, for the fiscal years ended March 31, 2012 and 2011 amounted to $0.8 million and $0.6 million, respectively.


29


GOODWILL AND INDEFINITE-LIVEDDEFINITE-LIVED INTANGIBLE ASSETS

Goodwill is the excess of the purchase price paid over the fair value of the net assets of thean acquired business. Goodwill and intangible assets with indefinite lives are not amortized; rather, they are tested for impairment on at least an annual basis.

The Company’s process of evaluating goodwill for impairment involves the determination of fair value of its goodwill reporting units: Software and CEG.  The Company conducts its annual goodwill impairment analysis during the fourth quarter of each fiscal year, measured as of March 31, unless triggering events occur which require goodwill to be tested at another date. As discussed in Note 1 to the Company's consolidated financial statements in Item 8, goodwill increased during the fiscal year ended March 31, 2013 as a result of the New Video Acquisition.

Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about the Company’s strategic plans with regard to its operations. To the extent additional information arises, market conditions change or the Company’s strategies change, it is possible that the conclusion regarding whether the Company’s remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on the Company’s consolidated financial position or results of operations.

The Company applies the Financial Accounting Standards Board's ("FASB") guidance when testing goodwill for impairment which permits the Company to make a qualitative assessment of whether goodwill is impaired, or opt to bypass the qualitative

27


assessment, and proceed directly to performing the first step of the two-step impairment test. If the Company performs a qualitative assessment and concludes it is more likely than not that the fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired and the two-step impairment test is unnecessary. However, if the Company concludes otherwise, it is then required to perform the first step of the two-step impairment test.
The Company has the unconditional option to bypass the qualitative assessment for any reporting unit and proceed directly to performing the first step of the goodwill impairment test. The Company may resume performing the qualitative assessment in any subsequent period.
For reporting units where we decide to perform a qualitative assessment, our management assesses and makes judgments regarding a variety of factors which potentially impact the fair value of a reporting unit, including general economic conditions, industry and market-specific conditions, customer behavior, cost factors, our financial performance and trends, our strategies and business plans, capital requirements, management and personnel issues, and our stock price, among others. Management then considers the totality of these and other factors, placing more weight on the events and circumstances that are judged to most affect a reporting unit's fair value or the carrying amount of its net assets, to reach a qualitative conclusion regarding whether it is more likely than not that the fair value of a reporting unit exceeds its carrying amount.

For reporting units where we decide to perform a quantitative testing approach in order to test goodwill, a determination of the fair value of our reporting units is required and is based, among other things, on estimates of future operating performance of the reporting unit and/or the component of the entity being valued. The Company is required to complete an impairment test for goodwill and record any resulting impairment losses at least on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, (“also known as impairment indicators”).indicators. This impairment test includes the projection and discounting of cash flows, analysis of our market factors impacting the businesses the Company operates and estimating the fair values of tangible and intangible assets and liabilities. Estimating future cash flows and determining their present values are based upon, among other things, certain assumptions about expected future operating performance and appropriate discount rates determined by management.

The discounted cash flow methodology establishes fair value by estimating the present value of the projected future cash flows to be generated from the reporting unit. The discount rate applied to the projected future cash flows to arrive at the present value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows.  The discounted cash flow methodology uses our projections of financial performance for a five-year period.  The most significant assumptions used in the discounted cash flow methodology are the discount rate the terminal value and expected future revenues and gross margins, which vary among reporting units. The market participant based WACCweighted average cost of capital for each unit gives consideration to factors including, but not limited to, capital structure, historic and projected financial performance, and size.

The market multiple methodology establishes fair value by comparing the reporting unit to other companies that are similar, from an operational or industry standpoint and considers the risk characteristics in order to determine the risk profile relative to the comparable companies as a group.  The most significant assumptions are the market multiplies and the control premium. The Company has elected not to apply a control premium to the fair value conclusions for the purposes of impairment testing.

The Company then assigns a weighting to the discounted cash flows and market multiple methodologies to derive the fair value of the reporting unit.  The income approach is weighted 70% and the market approach is weighted 30% to derive the fair value

30


of the reporting unit.  The weightings are evaluated each time a goodwill impairment assessment is performed and give consideration to the relative reliability of each approach at that time.

As discussed further in Note 2 to our consolidated financial statements, in the fourth quarter of the fiscal year ended March 31, 2012, in conjunction with management's annual testing of goodwill, the Company early adopted new accounting guidance which permits a qualitative assessment of goodwill and performed such assessment for its Software and CEG reporting units.

During the annual testing of goodwill for the fiscal year ended March 31, 2012,2013, management performed the qualitativequantitative assessment for its Software and CEG reporting units. The qualitative assessment includedIn determining fair value, we make various assumptions, including our expectations of future cash flows based on projections or forecasts derived from our analysis of business prospects, economic or market trends and any regulatory changes that may occur. We estimate the review of changesfair value of the following: recent financial performance, financial forecasts,reporting unit using a net present value methodology, which is dependent on significant assumptions related to estimated future discounted cash flows, discount rates carrying amount, market values of comparable companies, industry conditions, and general economic conditions. Furthermore, management considered the results of the most recent two-step quantitativetax rates. Our assumptions for our annual impairment test completed for a reporting unit (in this instanceshould not be construed as earnings guidance or long-term projections and are typically more conservative projections. Our assumptions included growth rates in adjusted EBITDA that are derived from the Company's budget for the Company'sfiscal year ended March 31, 2014 with flat growth rates of approximately 2% and 3% for Software and CEG, reporting units, as ofrespectively, for the fiscal years thereafter through the fiscal year ending March 31, 2011)2018. Further, we assumed a market-based weighted average cost of capital of 10% and 20% for Software and CEG, respectively, to discount cash flows and a blended federal and state tax rate of 40%. Management concluded

We determined that it was more likely than not that the estimated fair value of the Software andreporting unit exceeded its carrying value, inclusive of goodwill of $4.2 million, by over 100%. We determined that the fair value of the CEG reporting unit's equity exceedsunit exceeded its carrying value, inclusive of goodwill of $8.5 million, by over 100%. Thus, a significant decrease in fair value would be required before the respectivegoodwill balance at these reporting units would have a carrying value in excess of the fair value. As such, no further analysis of the Software and CEG reporting units was required and no goodwill impairment was recorded.recorded for the fiscal year ended March 31, 2013. There is, however, a significant risk of future impairment if management's expectations of future cash flows are not achieved.


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Information related to the goodwill allocated to the Company’s continuing operationsCompany's reportable segments is detailed below:
($ in thousands) Phase I Phase II Services Content & Entertainment Corporate Consolidated
As of March 31, 2012 $—
 $—
 $4,197
 $1,568
 $—
 $5,765
As of March 31, 2011 $—
 $—
 $4,197
 $1,568
 $—
 $5,765

For the fiscal year ended March 31, 2011, no impairment charge was recorded for goodwill related to the Company's continued operations.
($ in thousands) Phase I Phase II Services Content & Entertainment Corporate Consolidated
As of March 31, 2012 $—
 $—
 $4,197
 $1,568
 $—
 $5,765
Goodwill resulting from the New Video Acquisition —
 —
 —
 6,974
 —
 6,974
As of March 31, 2013 $—
 $—
 $4,197
 $8,542
 $—
 $12,739

As of March 31, 20122013, the Company’s finite-lived intangible assets consisted of customer relationships and agreements, theatre relationships, covenants not to compete, a favorable operating lease, trade names and trademarks. ForDuring the fiscal years ended March 31, 20122013 and 20112012, no impairment charge for finite-lived intangible assets was recorded for intangible assets.recorded.


REVENUE RECOGNITION

Phase I Deployment and Phase II Deployment

Virtual print fees (“VPFs”)VPFs are earned pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio to Phase 1 DC, CDF I and to Phase 2 DC when movies distributed by the studio are displayed on screens utilizing the Company’s Systems installed in movie theatres.  VPFs are earned and payable to Phase 1 DC and CDF I based on a defined fee schedule with a reduced VPF rate year over year until the sixth year (calendar 2011) at which point the VPF rate remains unchanged through the tenth year.  One VPF is payable for every digital title displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period in which the digital title first plays on a System for general audience viewing in a digitally-equipped movie theatre, as Phase 1 DC’s, CDF I’s and Phase 2 DC’s performance obligations have been substantially met at that time.

Phase 2 DC’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed; however, Phase 2 DC may no longer collect VPFs once “cost recoupment,” as defined in the agreements,contracts with movie studios and distributors, is achieved.  Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase 2 DC have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including the Company’s service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter, plus a compounded return on any billed but unpaid overhead and ongoing costs, of 15% per year.  Further, if cost recoupment occurs before the end of the eighth contract year, a one-time “cost recoupment bonus” is payable by the studios to the Company.  Any other cash flows, net of expenses, received by Phase 2 DC following the achievement of cost recoupment are required to be returned to the distributors on a pro-rata basis. At this time, the Company cannot estimate the timing or probability of the achievement of cost recoupment.


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Alternative content fees (“ACFs”) are earned pursuant to contracts with movie exhibitors, whereby amounts are payable to Phase 1 DC, CDF I and to Phase 2 DC, generally either a fixed amount or as a percentage of the applicable box office revenue derived from the exhibitor’s showing of content other than feature films,movies, such as concerts and sporting events (typically referred to as “alternative content”). ACF revenue is recognized in the period in which the alternative content first opens for audience viewing.

Revenues are deferred for up front exhibitor contributions and are recognized over the cost recoupment period, which is a period ofexpected to be ten years.

Services

For software multi-element licensing arrangements that do not require significant production, modification or customization of the licensed software, revenue is recognized for the various elements as follows: revenue for the licensed software element is recognized upon delivery and acceptance of the licensed software product, as that represents the culmination of the earnings process and the Company has no further obligations to the customer, relative to the software license. Revenue earned from consulting services is recognized upon the performance and completion of these services. Revenue earned from annual software maintenance is recognized ratably over the maintenance term (typically one year).

Revenue is deferred in cases where:  (1) a portion or the entire contract amount cannot be recognized as revenue, due to non-delivery or pre-acceptance of licensed software or custom programming, (2) uncompleted implementation of application service provider arrangements (“ASP Service”),Service, or (3) unexpired pro-rata periods of maintenance, minimum ASP Service fees or website subscription fees. As license fees, maintenance

29


fees, minimum ASP Service fees and website subscription fees are often paid in advance, a portion of this revenue is deferred until the contract ends. Such amounts are classified as deferred revenue and are recognized as earned revenue in accordance with the Company’s revenue recognition policies described above.

Exhibitors who will purchasepurchased and own Systems using their own financing in the Phase II Deployment, will paypaid an upfront activation fee that is generally $2 thousand per screen to the Company (the “Exhibitor-Buyer Structure”).  These upfront activation fees are recognized in the period in which these exhibitor owned Systems are ready for content, as the Company has no further obligations to the customer, and are generally paid quarterly from VPF revenues over approximately one year.  Additionally, the Company recognizes activation fee revenue of between $1 thousand and $2 thousand on Phase 2 DC Systems and for Systems installed by CDF2Holdings upon installation and such fees are generally collected upfront upon installation. The Company will then manage the billing and collection of VPFs and will remit all VPFs collected to the exhibitors, less an administrative fee that will approximate up to 10% of the VPFs collected.

The administrative fee related to the Phase I Deployment approximates 5% of the VPFs collected.collected and an incentive service fee equal to 2.5% of the VPFs earned by Phase 1 DC. This administrative fee is recognized in the period in which the billing of VPFs occurs, as performance obligations have been substantially met at that time.

Content & Entertainment

CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video-on-demand, and physical goods (e.g. DVD and Blu-ray Disc). The fee rate earned by the Company varies depending upon the nature of the agreements with the platform and content providers. Generally, revenues are recognized at the availability date of the content for a subscription digital platform, at the time of shipment for physical goods, or point-of-sale for transactional and video-on-demand services.
CEG also has contracts for the theatrical distribution of third party feature filmsmovies and alternative content. CEG’s distribution fee revenue and CEG's participation in box office receipts is recognized at the time a feature filmmovie and alternative content is viewed. CEG has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third party feature films’movies’ or alternative content’s theatrical release date.



3230


Results of Continuing Operations for the Fiscal Years Ended March 31, 20122013 and 20112012

Revenues
For the Fiscal Years Ended March 31,For the Fiscal Year Ended March 31,
($ in thousands)2012 2011 $ Change % Change2013 2012 $ Change % Change
Phase I Deployment$44,561
 $43,431
 $1,130
 3%$39,646
 $42,028
 $(2,382) (6)%
Phase II Deployment13,335
 6,481
 6,854
 106%12,464
 11,714
 750
 6 %
Services17,065
 7,399
 9,666
 131%19,920
 21,219
 (1,299) (6)%
Content & Entertainment1,596
 1,128
 468
 41%16,050
 1,596
 14,454
 906 %
$76,557
 $58,439
 $18,118
 31%$88,080
 $76,557
 $11,523
 15 %
Revenues increased $18.111.5 million or 31%.  The $6.9 million15% increaseduring the fiscal year ended March 31, 2013 with the organic growth in revenues in Content and Entertainment as well as the New Video Acquisition more than offsetting decreases in Deployment and Services revenues. Phase II1 and Phase 2 Deployment segment wasrevenues declined by $1.6 million for the fiscal year ended March 31, 2013 partially due to an increasea number of unexpected releasing decisions made by the major studios during the Company's fiscal second quarter: (i) studios avoided releasing wide titles in the weekends around the Dark Knight Rises; (ii) studios reduced the breadth of releases and/or delayed releases in light of the shootings at a Dark Knight Rises screening in Aurora, CO in July; (iii) studios reduced the breadth and/or number of releases around the Olympics in August; and (iv) several wide releases were delayed due to production, marketing or 3D conversion issues. The delayed releases have been moved to the first and second quarters of the next fiscal year. Phase 2 DC's financed Systems installed and ready for content towere 2,503 at March 31, 2013, up from 1,815 at March 31, 2012 from 785 at. Non-deployment revenues grew 58% inclusive of New Video and grew 1% assuming New Video had been included within the fiscal year ended March 31, 20112012.  The operating results on a pro-forma basis. 
In the Services segment, a $9.71.3 million, or 131%6%, increasedecrease in revenues in the Services segment was primarily due to (i) lower results in Software license fees reflecting the decline in Phase 2 installations year over year as well as several studio distributor customers delaying software installations representing in excess of $2.0 million of revenues until the fiscal year ended March 31, 2014 and (ii) decreased exhibitor activation fees, partially offset by increased digital cinema servicing fees. During the fiscal year ended March 31, 2013, 2,371 Phase 2 DC Cinedigm-Financed and Exhibitor-Buyer Structure Systems were installed and a total of 7,980 installed Phase 2 Systems were generating service fees at March 31, 2013as 3,414compared to 5,609 Phase 2 DCSystems at March 31, 2012. The Company also services an additional 3,724 screens in its Phase I deployment subsidiary. We expect growth in Services as we (i) commence international servicing and Exhibitor-Buyer systems were installedsoftware installations in Australia, the Caribbean, Latin America and Europe during the fiscal year ended March 31, 20122014 from our over 1,000 international screen backlog; (ii) recognize additional revenues from delayed existing software customers; and a total of 5,609 installed Phase 2 systems were generating service fees; and (ii) a 422% increase in Software license fee and maintenance revenues due to the previously described increase in Phase 2 systems deployed as well as an increase in license and maintenance fees from other software customers due to the recently announced new business contracts. We expect(iii) achieve continued growth in software and cinema services from (i) continued deployments from our current 812 screen backlog as well as from new exhibitor customer signings as we enter the final 6 months of the contractual digital cinema deployment period; (ii) additional revenues from recently signed software customers upon installation in the remainder of this fiscal year and next fiscal year; and (iii) new potential software customers based on our active domestic and internationalstrong sales pipeline.

AsThe CEG business expanded significantly to revenues of March 31, 2012 Cinedigm provides its digital cinema services through both its Phase 2 deployment subsidiary and third party exhibitor-buyer customers to a total of 5,609 Phase 2 DC screens in comparison to 2,195 at March 31, 2011. Cinedigm also services an additional 3,724 screens in its Phase 1 deployment subsidiary as of March 31, 2012. We will deploy additional Phase 2 DC Systems under various non-recourse credit facility commitments and will receive fees through the Exhibitor-Buyer Structure and CDF2.
CEG's theatrical release distribution fee revenue increased 41% to $1.616.1 million due to an increase in its theatrical release schedule of independent filmsorganic growth and other events this fiscal year and a continued strong Kidtoons release calendar.  Going forward, the CEG business is expected to expand significantly due to the acquisition of New Video Group, Inc. ("New Video") which was completed on April 20, 2012 induring the first quarter of the fiscal year ending March 31, 2013. Total CEG will continuerevenues increased by 13%, year over year, inclusive of New Video on a pro-forma basis. CEG has grown its historical fee-for-service theatrical releasing efforts (Indie Direct) as well as expand the New Videoand has expanded its ancillary market distribution efforts of distributing both movies and television entertainment content into digital, video on demandVOD and physical goods (DVDs and Blue Ray)Blu-ray discs). During the fiscal year, CEG outperformed the industry with growth in digital revenues of 55% versus the industry average of 27% and growth in physical goods sales of 65% versus the industry average of (6%). CEG will utilizeis utilizing the combined resources of its existing theatrical releasing infrastructure and the New Videoits home entertainment distribution capabilities to acquire the North American distribution rights in all media for independent filmsmovies as well as to launch several programmatic alternative content channels. Yearentertainment networks through OTT channels to date,all home and mobile platforms. During the fiscal year ended March 31, 2013, CEG has acquired the distribution rights to 213 independent films in its fiscal fourth quarter and 2 additional independent films in April 2012,
with the firstmovies has an active acquisition pipeline. CEG expects to release scheduled for late June 2012 and future releases expected in our third and fourth quartersfive of these movies during the fiscal year endingthree months ended June 30, 2013. In addition, CEG expects releases during the three months ended March 31, 2013.2013 to be profitable based upon ancillary revenue pre-sales, DVD pre-orders as well as projected transactional VOD results.


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Direct Operating Expenses
For the Fiscal Years Ended March 31,For the Fiscal Year Ended March 31,
($ in thousands)2012 2011 $ Change % Change2013 2012 $ Change % Change
Phase I Deployment$545
 $361
 $184
 51%$459
 $545
 $(86) (16)%
Phase II Deployment365
 185
 180
 97%687
 365
 322
 88 %
Services4,220
 2,455
 1,765
 72%4,795
 4,220
 575
 14 %
Content & Entertainment1,912
 1,328
 584
 44%6,548
 1,912
 4,636
 242 %
$7,042
 $4,329
 $2,713
 63%$12,489
 $7,042
 $5,447
 77 %
Direct operating expenses increased by 63%77% due to the acquisition of New Video and the resulting 58% total non-deployment revenue growth.  Excluding the impact of the purchase of New Video, direct operating costs increased by $1.0 million, which is tied to our overall revenue increases of 121%or 55%, from the fiscal year ending March 31, 2012 on a pro-forma basis. The decreased operating costs in our Servicesthe Phase I Deployment segment and Content & Entertainment segments, respectively.  Thethe increase in direct operating costs in the Phase I and Phase II Deployment segmentssegment was primarily due to increasedrespective decreases and increases in property taxes and insurance incurred on deployed Systems. The increase in the Services segment was primarily related to (i) additional administrative and financial personnel required to service our growing Phase 2 screens; and (ii) additional personnel costs to support the software development requirements of our current and new

33


customers, as well as new product development efforts. The increase in the Content & Entertainment segment was directly related to additional eventsour acquisition of New Video along with increased indie direct fees tied to expanded fee-for-service movie releases. In addition, we incurred approximately $0.8 million of expenses related to advances and filmmarketing for movie releases during the fiscal year.year ended March 31, 2013 that we expect to result in revenues in future quarters from ancillary home entertainment revenue streams. In accordance with U.S. generally accepted accounting principles ("GAAP"), Cinedigm must recognize its upfront content acquisition and marketing expenses at the time of a theatrical release of a movie. We expect to recover those expenses as well as earn our fee based profits over the ensuing 12-36 months from revenues earned on the distribution of the movie in the ancillary home entertainment markets. This timing difference creates a “J-Curve” and will continue in future periods as we increase our distribution activities and we will also experience an increase in direct operating expenses to increase associatedcorresponding with additional revenue growth.

Selling, General and Administrative Expenses
For the Fiscal Years Ended March 31,For the Fiscal Year Ended March 31,
($ in thousands)2012 2011 $ Change % Change2013 2012 $ Change % Change
Phase I Deployment$221
 $35
 $186
 531%$92
 $221
 $(129) (58)%
Phase II Deployment202
 49
 153
 312%139
 202
 (63) (31)%
Services3,434
 2,561
 873
 34%3,865
 3,434
 431
 13 %
Content & Entertainment1,791
 1,319
 472
 36%8,308
 1,791
 6,517
 364 %
Corporate10,069
 7,813
 2,256
 29%10,719
 10,069
 650
 6 %
$15,717
 $11,777
 $3,940
 33%$23,123
 $15,717
 $7,406
 47 %
Selling, general and administrative expenses increased $3.97.4 million or 33%47% in support of the 121%58% increase in non-deployment revenues. Total selling, general and administrative expense increased by $5.4 million, or 31%, inclusive of New Video in both periods on a pro-forma basis. This expense growth rate below the revenue growth rate is the result of the restructuring activities undertaken by the Company in the second half of the fiscal year ended March 31, 2012 and focused expense management. The increase in the Services segment was mainly due to payroll and related employee expenses for increased staffing as we added salesservicing resources to support the expanding digital cinema exhibitor salesmanagement efforts as well as additional management, sales resources, software development and quality assurance staff to support the significant recent software customer additions. The Content & Entertainment segment increased 36%364% as we addeda result of our acquisition of New Video and the additional staff to support our expanded releasing activities this year. The increase within Corporate was mainly due to (i) the lag between our restructuring planaddition of financial and actual plan implementation;corporate resources from New Video; (ii) increased professional services feesinsurance, accounting and legal expenses related to assist inour business growth and the transitionacquisition of our finance organization as well as to support the marketing of our products and services;New Video; and (iii) increased travel and sales costs.  We expect to redeploy restructuring related SG&A savings in the near term into the resources to support our growth plans.   Future increases in selling, general and administrative expenses will be tied to additional revenues as we support our recent new software business contracts and expanding sales pipeline and our additional content acquisition and distribution activities with additional sales and service headcount.

Merger and Acquisition Expenses

Merger and acquisition expenses included in corporate expenses for the fiscal year ended March 31, 20122013 of $0.6$1.3 million include professional fees incurred which pertained to the purchase of New Video which was consummated in April 2012.An additional $1.1 million of merger and acquisition expenses was incurred subsequent to March 31, 2012.

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Restructuring expense

Restructuring and Transition Expenses

During the fiscal year ended March 31, 2012,2013, the Company completed a strategic assessment of its resource requirements forwithin its Content & Entertainment reporting segment. Based upon the continued integration of the New Video Acquisition, continued shifting in its business from physical to digital content distribution and the movement towards a greater share of its own theatrical releasing product, such initiatives resulted in a workforce reduction and severance and employee related expense of $0.3 million. During the fiscal year endedMarch 31, 2012, the Company completed a strategic assessment of its resource requirements within its ongoing businesses which resulted in a workforce reduction, and a severance and employee related charge of $0.8 million. During the three months ended March 31, 2012, the Company recorded an additional $0.4 million related to severance and a lease termination. The total expense of $1.2 million for the fiscal year ended March 31, 2012 is reflected as restructuring and transition expenses in the Company's consolidated statements of operations.

During the fiscal year ended March 31, 2011, the Company incurred $1.4 million in transition costs principally associated with the retirement of our former CEO.million.

Depreciation and Amortization Expense on Property and Equipment
For the Fiscal Years Ended March 31,For the Fiscal Year Ended March 31,
($ in thousands)2012 2011 $ Change % Change2013 2012 $ Change % Change
Phase I Deployment$28,553
 $28,557
 $(4) — %$28,549
 $28,553
 $(4) — %
Phase II Deployment6,778
 3,170
 3,608
 114 %7,371
 6,778
 593
 9 %
Services158
 149
 9
 6 %148
 158
 (10) (6)%
Content & Entertainment8
 2
 6
 300 %72
 8
 64
 800 %
Corporate368
 38
 330
 868 %358
 368
 (10) (3)%
$35,865
 $31,916
 $3,949
 12 %$36,498
 $35,865
 $633
 2 %
Depreciation and amortization expense increased $3.90.6 million or 12%2%. The increase in the Phase II Deployment segment represents depreciation on the increased number of Phase 2 DC Systems which were not in service during the fiscal year ended

34


March 31, 20112012. We expect the depreciation and amortization expense in the Phase II Deployment segment to remain at similar levels as limited futurethe Phase 2 DCdeployment period has ended and we do not expect to add international Systems will be added that require consolidation on our balance sheet andsheet. In addition, we expect modest additional growth in Services and Corporate depreciation and amortization expense tied to technology investments supporting our software expansion.expansion and our upgraded corporate information technology infrastructure. Content & Entertainment depreciation will in the future reflect the consolidatedacquisition of New Video.

Amortization of intangible assets

Amortization of intangible assets increased to $1.6 million from $0.3 million for the fiscal year ended March 31, 2013, principally due to the amortization of intangible assets that were allocated preliminary purchase in connection with the New Video results and additional depreciation and amortization related to our acquisition of content distribution rights.Acquisition.

Interest expense
For the Fiscal Years Ended March 31,For the Fiscal Year Ended March 31,
($ in thousands)2012 2011 $ Change % Change2013 2012 $ Change % Change
Phase I Deployment$10,134
 $9,986
 $148
 1%$9,016
 $10,134
 $(1,118) (11)%
Phase II Deployment2,466
 1,524
 942
 62%2,351
 2,466
 (115) (5)%
Corporate17,299
 15,481
 1,818
 12%16,947
 17,299
 (352) (2)%
$29,899
 $26,991
 $2,908
 11%$28,314
 $29,899
 $(1,585) (5)%
Interest expense increaseddecreased $2.91.6 million or 11%5%.  The 1%11% increasedecrease in interest paid and accrued within the non-recourse Phase I Deployment segment relates to the continued repayment of Phase 1 DC's 2010 Term Loans from free cash flow and the resulting reduced debtoutstanding principal balance offset by additional hedging costs from the hedge put in place in June 2010.2010 through February 2013. The 2013 Term Loans will be at a rate of LIBOR, plus 275 basis points with a 1.0% LIBOR floor, versus the 2010 Term Loan rate of LIBOR, plus 350 basis points with a 1.75% LIBOR floor. Interest increaseddecreased within the Phase II Deployment segment related to the non-recourse credit facilities with KBC Bank NV (the “KBC Facilities”)Facilities as we added approximately $14.0 millionthe effect of additionalthe reduction of outstanding principal more than offset the addition of non-recourse Phase 2 debt during the fiscal year ended March 31, 20122013 to fund the purchase of Systems from Barco.Systems.  Phase 2 DC’s non-recourse interest expense is expected to increase modestly with the growth in deployments during thecontinue to decrease as it did this fiscal year ending March 31, 2013 as we continue to repay the Company does not expect to incur any significant increase in non-recourse indebtedness to fund these deployments.KBC Facilities from free cash flow and the benefit from the resulting reduced debt balance. The increasedecrease in interest paid and accrued within Corporate is related to the amended2010 Note, which was paid off in February 2013.  The 2013 Prospect Loan will be at an interest rate of 13.5%, including a cash rate of LIBOR, plus 9.0% with a 2.0% LIBOR floor, and restated note with an affiliatea Payment In Kind ("PIK") rate of Sageview Capital LP (the "2010 Note")2.5%. Interest on the 2010 Note iswas 8% PIK Interest and 7% per annum paid in cash.  Through September 30, 2011, the Company had an interest reserve set aside to cover cash interest payments on this note. Beginning October 1, 2011, the Company has paid its cash interest expense through the cash flows from operations.

Non-cash interest expense was approximately $9.5$9.2 million and $8.9$9.5 million for the fiscal years ended March 31, 20122013 and 2011,2012, respectively. PIK interest was $7.1 million and $6.5 million for the fiscal years ended March 31, 20122013 and 2011, respectively.2012. The remaining amounts for the

33


fiscal years then endedMarch 31, 2013 and 2012 represent the accretion of $1.8 million and $2.1 million, respectively, on the note payable discount associated with the 2010 Note which will continue over the term of the 2010 Note and the accretion of approximately $0.3 million for both periods on the note payable discount associated with the 2010 Term Loans which will continue over the term of the 2010 Term Loans.

Change in fair value of interest rate swaps

The change in fair value of the interest rate swaps were gains of $0.2$1.2 million and $1.1$0.2 million for the fiscal years ended March 31, 20122013 and 2011,2012, respectively.  The swap agreement in the prior year related to the prior credit facility, which was terminated on May 6, 2010 upon the completion of the Phase I Deployment refinancing.  It has been replaced by new swap agreements related to the former 2010 Term Loans entered into on June 7, 2010 which became effective on June 15, 2011.2011 and the 2013 Term Loans which became effective on February 28, 2013.

Change in fair value of warrantsBenefit from income taxes

The changeA net benefit from income taxes of $4.9 million was recorded primarily from the New Video Acquisition during the fiscal year ended March 31, 2013. A net deferred tax liability of $5.0 million was recorded upon the New Video Acquisition for the excess of the financial statement basis over the tax basis of the acquired assets and liabilities. As New Video will be included in fair valuethe Company's consolidated federal and state tax returns, deferred tax liabilities assumed in the New Video Acquisition are able to offset the reversal of warrants issued tothe Company's pre-existing deferred tax assets. Accordingly, the Company's valuation allowance has been reduced by $5.0 million and recorded as a designeedeferred tax benefit in the accompanying consolidated statements of Sageview Capital LP (“Sageview”), related to the 2010 Note, was a gain of $3.1 millionoperations for the fiscal year ended March 31, 20112013. The resaleManagement will continue to assess the realizability of the shares underlying these warrants was registered with the SEC in September 2010deferred tax assets at each interim and the Company reclassified the warrant liability of $16.1 million to equity.annual balance sheet date based upon actual and forecasted operating results.

Adjusted EBITDA

The Company measures its financial success based upon growth in revenues and earnings before interest, depreciation, amortization, other income (expense), net, stock-based compensation, allocated costs attributable to discontinued operations, restructuring and transition expenses, merger and acquisition expenses, allowance for doubtful accounts and certain other items ("Adjusted EBITDA").  Further, the Company analyzes this measurement excluding the results of its Phase 1 DC and Phase 2 DC subsidiaries, and includes in this measurement intercompany service fees earned by its digital cinema servicing group from the Phase I and Phase II Deployments, which are eliminated in consolidation (See Note 11 Segment Information for further details). This measure isolates the financial and capital structure impact of the Company's non-recourse Phase 1 DC and Phase 2 DC subsidiaries.

35



The Company reported continued improvedlower Adjusted EBITDA (including its Phase 1 DC and Phase 2 DC subsidiaries) of $55.6 million for the fiscal year ended March 31, 2013 in comparison to $58.0 million for the fiscal year ended March 31, 2012 in comparison to. Adjusted EBITDA from non-deployment businesses was $45.85.1 million during the fiscal year ended March 31, 2013, decreasing from $5.7 million for the fiscal year ended March 31, 20112012. AdjustedThis decline was primarily driven by three factors: (i) the fiscal year ending March 31, 2012 period was Cinedigm's largest deployment period ever with approximately 3,419 screens installed versus 2,371 screens this fiscal year representing an approximately $3.2 million difference period over period in digital cinema services and software EBITDA all other factors held constant from non-deployment businesses grewthe reduction in installations; (ii) delayed delivery and customer product acceptance related to $5.7approximately $2.5 million in software revenues, with almost $2.0 million related to a contract with a major studio customer, during the fiscal year endedending March 31, 2013; and (iii) as previously discussed, a number of unexpected releasing decisions made by the major studios reduced deployment EBITDA by $2.0 million predominantly in fiscal second quarter as compared to prior year: (a) studios avoided releasing wide titles in the weekends around the Dark Knight Rises; (b) studios reduced the breadth of releases and/or delayed releases in light of the shootings at a Dark Knight Rises screening in Aurora, CO in July; (c) studios reduced the breadth and/or number of releases around the Olympics in August; and (d) several wide releases were delayed due to production, marketing or 3D conversion issues. The delayed releases have been moved to the first and second quarters of the next fiscal year. Based on announced release plans, actual results and our internal estimates, we do not expect studio releasing patterns like those experienced during the fiscal quarter ended September 30, 2012 from $0.9to negatively impact fiscal year ending March 31, 2014. Finally, as previously described and inclusive in these results, the Company incurred approximately $0.8 million duringof "J-Curve" content distribution costs and $0.3 million of related revenues in the fiscal year ended March 31, 2011. The Company continues to benefit from growth2013 in its installed Systems, growth in software license and maintenance fees and the inherent operating leverage embedded in its business model.advance of earning additional ancillary home entertainment revenues. Phase 1 DC and Phase 2 DC revenues are expected to be relatively flat going forward as the domestic deployment period ended at January 31, 2013 and any remaining growth in service revenues is expected todomestic and international installations will be through installations the exhibitor-buyer programan Exhibitor-Buyer structure or systems financed by CDF 2, which the Company does not consolidate into its Consolidated Statements of Operations.other servicing partnerships. Based on the expected growth in and recently signed software contracts and the expansion in CEG driven by the acquisitiongrowth in our library of New Video,distribution rights and our independent movie release slate, the Company expects Adjusted EBITDA performance to continue to improve during the fiscal year 2013ended March 31, 2014 relative to priorcurrent year results although theresults. The Company remains in investment mode as it intends to invest in the growth of its business through the acquisition of content distribution rights, and through related marketing related expenditures.expenditures and through the continued development of additional software products and services.

Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP and may not be comparable to other similarly titled measures of other companies. The Company uses Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities. For this reason, the Company believes Adjusted EBITDA will also be useful to others, including its stockholders, as a valuable financial metric.


34


Management presents Adjusted EBITDA because it believes that Adjusted EBITDA is a useful supplement to net loss from continuing operations as an indicator of operating performance. Management also believes that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating the Company's performance and comparing our performance with the performance of our competitors. Management also uses Adjusted EBITDA for planning purposes, as well as to evaluate the Company's performance because Adjusted EBITDA excludes certain non-recurring or non-cash items, such as stock-based compensation charges, that management believes are not indicative of the Company's ongoing operating performance.

The Company believes that Adjusted EBITDA is a performance measure and not a liquidity measure, and a reconciliation between net loss from continuing operations and Adjusted EBITDA is provided in the financial results. Adjusted EBITDA should not be considered as an alternative to income from operations or net loss from continuing operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. Management does not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.


36


Following is the reconciliation of the Company's consolidated Adjusted EBITDA to consolidated GAAP net loss from continuing operations:

 For the Fiscal Years Ended March 31, For the Fiscal Year Ended March 31,
($ in thousands) 2012 2011 2013 2012
Net loss from continuing operations $(13,963) $(21,621)
Net loss from continuing operations before income taxes $(25,526) $(13,963)
Add Back:
        
Amortization of software development 759
 636
Amortization of capitalized software costs 1,165
 759
Depreciation and amortization of property and equipment 35,865
 31,916
 36,498
 35,865
Amortization of intangible assets 294
 333
 1,565
 294
Interest income (140) (154) (48) (140)
Debt prepayment fees 3,725
 —
Loss on extinguishment of notes payable 7,905
 —
Interest expense 29,899
 26,991
 28,314
 29,899
Loss on extinguishment of note payable —
 4,448
Other (income) expense, net (912) 433
Loss on investment in non-consolidated entity 510
 —
Change in fair value of interest rate swap (200) 1,326
Change in fair value of warrants —
 (3,142)
Stock-based expenses 1,013
 104
Stock-based compensation 1,995
 2,159
Income on investment in non-consolidated entity (322) 510
Other income, net (653) (912)
Change in fair value of interest rate derivatives (1,231) (200)
Stock-based compensation and expenses 2,279
 3,008
Non-recurring transaction expenses 1,907
 2,270
Allocated costs attributable to discontinued operations 623
 830
 —
 623
Restructuring and transition expenses 1,207
 1,403
Merger and acquisition expenses 604
 —
Provision for doubtful accounts 459
 144
Adjusted EBITDA $58,013
 $45,806
 $55,578
 $58,013
        
Adjustments related to the Phase I and Phase II Deployments:
        
Depreciation and amortization of property and equipment $(35,331) $(31,726) $(35,920) $(35,331)
Amortization of intangible assets (52) (46) (53) (52)
Income from operations (21,110) (17,401) (14,483) (16,951)
Intersegment services fees earned (1) 4,159
 4,293
Intersegment services fees earned 24
 —
Adjusted EBITDA from non-deployment businesses $5,679
 $926
 $5,146
 $5,679

(1) Intersegment revenues of the Services segment represent service fees earned from the Phase I and Phase II Deployments.



3735


Recent Accounting Pronouncements

Recently Adopted Standards
In May 2011,July 2012, the FASB issued a new accounting standard update, which amends guidance allowing an entity to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite – lived intangible asset is impaired. This assessment should be used as a basis for determining whether it is necessary to perform the quantitative impairment test. An entity would not be required to calculate the fair value measurement guidance and includes some enhanced disclosure requirements. The most significant change in disclosures is an expansion of the information requiredintangible asset and perform the quantitative test unless the entity determines, based upon its qualitative assessment, that it is more likely than not that its fair value is less than its carrying value. The update provides further guidance of events and circumstances that an entity should consider in determining whether it is more likely than not that the fair value of an indefinite – lived intangible asset is less than its carrying amount. The update also allows an entity the option to bypass the qualitative assessment for Level 3 measurements based on unobservable inputs. The standardany indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. This update is effective for fiscal yearsannual and interim periods beginning after DecemberSeptember 15, 2011.2012, with early adoption permitted. The Company will adoptadopted this standard Aprilon October 1, 2012 and does not expect the2012. The adoption of this standard todid not have a material impact on the consolidated financial statements and disclosures.

In June 2011,October 2012, the FASB codifiedissued a new accounting standard update, which aligns the guidance on fair value measurements in the impairment test of unamortized film costs with the guidance on fair value measurements in other instances within GAAP. The amendments in this update eliminate certain requirements related to the presentationan impairment assessment of comprehensive income. The guidance requires entities to present net incomeunamortized film costs and other comprehensive income in a single continuous statement of comprehensive income or in two separate, but consecutive, statements. Theclarify when unamortized film costs should be assessed for impairment. This update does not add any new guidance does not changeto the components that are recognized in net income and the components that are recognized in other comprehensive income. Currently, the Company presents comprehensive income in its statements of equity. The provisions of this guidance areFASB's codification for Entertainment - Films. This update is effective for the Company's impairment assessments performed on or after December 15, 2012. The Company beginning Apriladopted this standard on January 1, 2012 and are required to be applied retroactively.

In September 2011, the FASB codified guidance related to the testing of goodwill for impairment.2013. The guidance provides entities with the option to first assess qualitative factors to determine whether the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines the fair value of a reporting unit is not less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test. Entities have the option of bypassing the qualitative analysis in any period and proceeding directly to the two-step impairment test. The provisionsadoption of this guidance are effective forstandard did not have a material impact on the Company April 1, 2012 but are permitted to be adopted earlier.

In the fourth quarter of the fiscal year ended March 31, 2012, in conjunction with management's annual testing of goodwill, the Company early adopted the new accounting guidance.consolidated financial statements and disclosures.

Liquidity and Capital Resources

We have incurred net losses each year since we commenced our operations. Since our inception, we have financed our operations substantially through the private placement of shares of our common and preferred stock, the issuance of promissory notes, our initial public offering and subsequent private and public offerings, notes payable and common stock used to fund various acquisitions.

Our business is primarily driven by the rapidly expandinggrowth in global demand for entertainment content in all forms, and in particular, the shifting consumer demand for content in digital forms within home and mobile devices as well as the maturing digital cinema marketplace and the primarymarketplace. Primary revenue driverdrivers will be the increasing number of digitally equipped screens, the growing demand for software to power these screens and drive other efficiencies and the demand for entertainment content in both theatrical and home ancillary markets. According to the Motion Picture Association of America, during 2012 there arewere approximately 42,00043,000 domestic (United States and Canada) movie theatre screens and approximately 124,000130,000 screens worldwide.  Approximately 28,000worldwide, of which approximately 36,000 of the domestic screens arewere equipped with digital cinema technology, and approximately 9,40011,687 of those screens containcontained our Systems and software. We anticipate the vast majority of theThe Company's North American industry's screens to be converted to digital in the next 12 months.deployment period ended at January 31, 2013 other than for a modest special program for drive-in theatres. We have deployed 3,724 screens in our Phase I Deployment, and are completing our efforts to convert up to an additional 10,000 domestic screens to digital in our Phase II Deployment over a four year period starting October 2008 and currently contractually scheduled to end at September 30, 2012, of which 5,609 Systems have been installed as ofthrough March 31, 20122013. have deployed 7,980 Phase 2 DC Systems. To date, the number of digitally-equipped screens in the marketplace has been a significant determinant of our potential revenue streams. The expansion of our content business into the ancillary distribution markets increasesas well into the acquisition and distribution of new movie releases expands our growthmarket opportunities as the rapidly evolving digital and entertainment landscape creates significant new growth opportunitiespotential for the Company.

InBeginning in May 2010, Phase 2 B/AIX, an indirect wholly-owned subsidiary of the Company, entered into additional credit facilities, (the “KBC Facilities”)the KBC Facilities, to fund the purchase of Systems from Barco, to be installed in movie theatres as part of the Company’s Phase II Deployment.  As of March 31, 20122013, the outstanding principal balance of the KBC Facilities was $52.345.6 million.

In February 2013, the Company refinanced its existing non-recourse senior 2010 Term Loan and recourse 2010 Note with a $125.0 million senior non-recourse credit facility led by Société Générale, New York Branch and a $70.0 million non-recourse credit facility provided by Prospect Capital Corporation. These two new non-recourse credit facilities will be supported by the cash flows of the Phase 1 deployment and the Company’s digital cinema servicing business.

As of March 31, 20122013, we had positivenegative working capital, defined as current assets less current liabilities, of $3.017.5 million and cash and cash equivalents restricted available-for-sale investments and restricted cash totaling $33.120.2 million.

Operating activities provided net cash of $39.929.4 million and $30.139.9 million for the fiscal years ended March 31, 20122013 and 2011,2012, respectively. Our businessThe reduction is primarily driven byattributed to a $12.3 million reduction in working capital. While the emerging digital cinema marketplace andCompany expects to recover initial investments in movie acquisition in the primary driver of its operatingnext fiscal year, cash flow isflows from VPFs are expected to remain consistent with the number of installed digital cinema systems and the pace of continued installations.current fiscal year. Generally, changes in accounts receivable from our studio customers and others is a large component of operating cash flow, and during a period of increasing system deployments, the Company expects studio receivables to grow and negatively impact working
capital and operating cash flow. During periods of fewer deployments, the Company expects receivables to decrease and positively impact cash flow, and eventually to stabilize. ForThe CEG business differs slightly from our deployment business as we will continue to build receivables, the near term,amount of which will depend upon the success of the theatrical releases, through the end of this fiscal year which the Company expects receivables to remain steady or decline as we entercollect upon during the final stagesfirst quarter of the Phase 2 Systems deployment. However, a significant portion of the current Phase 2 deployments are being made under the Exhibitor-Buyer Structure, wherenext fiscal year. Generally, the Company passesmakes advancements towards theatrical releases and expects to recover the majority of the studio paymentsinitial expenditures within six to the exhibitor, less an administrative fee, and thereforetwelve months. CEG also generates additional operating cash flow will be largely unaffected.flows during the Company's fiscal fourth quarter resulting from holiday revenues and distributes royalties from such revenues in the subsequent one to two fiscal quarters. The changes in the Company's trade accounts payable is also a significant factor, however even in a period of deployments,but the Company does not anticipate major changes in payables activity. The Company is also subject to changes in interest expense due to increasing debt levels to fund digital cinema installations, and also has non-cash expense fluctuations, primarily resulting from the change in the fair value of interest rate swap arrangements. We expect operating activities to continue to be a positive source of cash.

Investing activities used net cash of $17.34.3 million and $41.117.3 million for the fiscal years ended March 31, 20122013 and 2011,2012, respectively. The decrease in net cash used was dueis primarily attributed to the numbersale of Phase 2 DC Systems purchased compared topreviously restricted available for sale investments, more than offsetting cash paid for the prior year purchases and thepurchase of New Video, net usage of cash related to restricted available-for-sale investments.acquired.  We expect cash used in investing activities to decline significantly as we do not expect many additionalthe Phase 2 DC System deployments to be funded by the Company. All Phase 2 DC Systems purchased are financed with non-recourse debt and exhibitor contributions. CinedigmII Deployment is complete. The Company does not fund any of the Systems capital expenditures from its operating cash flows.
 
Financing activities used net cash of $29.5 million and $15.5 million for the fiscal yearyears ended March 31, 20122013 and provided net cash2012, respectively.  The refinancing of$12.6 million for the fiscal year ended March 31, 2011.  The decrease in cash provided was due to the proceeds from the 2010 Term Loans offset by the repaymentand prepayment of the prior Phase 1 DC credit facility and vendor financing note and debt issuance costs resulting from2010 Note along with normal principal reduction of the 2010 Term Loans paidKBC facilities during the fiscal year ended March 31, 20112013 more than offset in part by net proceeds from the 2013 Term Loans, 2013 Prospect Loan and sale of common stock in July, 2010.April 2012.  Financing activities are expected to continue using the net cash generated from the Phase 1 and Phase 2 DC operations, primarily for principal repayments on the 20102013 Term Loans, 2013 Prospect Loan and other existing debt facilities.  

The Company expects to deploy Systems in our Phase II Deployment using a combination of non-recourse Cinedigm-financed screens and the Exhibitor-Buyer Structure.  The method used to deploy systems will vary depending on the exhibitors’ preference and the exhibitors’ ability to finance Phase II Systems.  The number of Systems ultimately deployed by each method cannot be predicted at this time, though we expect very few additional Phase 2 screens deployed that will be consolidated into the Company's balance sheet as these will be primarily carried out through CDF2.

We have contractual obligations that include long-term debt consisting of notes payable, credit facilities, non-cancelable long-term capital lease obligations for the Pavilion Theatre and other various computer related equipment, non-cancelable operating leases consisting of real estate leases, and minimum guaranteed obligations under theatre advertising agreements with exhibitors for displaying cinema advertising. The capital lease obligation of the Pavilion Theatre is paid by an unrelated third party, although Cinedigm remains the primary lessee and would be obligated to pay if the unrelated third party were to default on its rental payment obligations. The sub-lease agreement was amended during January 2013. The impact of the capital lease amendment to the Company's consolidated financial statements was not material.


3836


The following table summarizes our significant contractual obligations as of fiscal March 31, 20122013:

 Payments Due
Contractual Obligations ($ in thousands)Total 2013 
2014 &
2015
 
2016 &
2017
 Thereafter
Long-term recourse debt (1)$111,446
 $—
 $111,446
 $—
 $—
Long-term non-recourse debt (2)172,162
 35,644
 68,198
 56,429
 11,891
Capital lease obligations (3)5,429
 185
 531
 755
 3,958
Debt-related obligations, principal289,037
 35,829
 180,175
 57,184
 15,849
Interest on recourse debt16,648
 6,666
 9,982
 —
 —
Interest on non-recourse debt22,332
 7,784
 10,394
 3,523
 631
Interest on capital leases (3)6,456
 947
 1,773
 1,549
 2,187
Total interest45,436
 15,397
 22,149
 5,072
 2,818
Total debt-related obligations$334,473
 $51,226
 $202,324
 $62,256
 $18,667
Operating lease obligations (4)$5,242
 $1,255
 $2,522
 $1,465
 $—
Obligations to be included in operating expenses5,242
 1,255
 2,522
 1,465
 —
Purchase obligations (5)2,148
 2,148
 —
 —
 —
Total$7,390
 $3,403
 $2,522
 $1,465
 $—
Total non-recourse debt including interest$194,494
 $43,428
 $78,592
 $59,952
 $12,522
 Payments Due
Contractual Obligations ($ in thousands)Total 2014 
2015 &
2016
 
2017 &
2018
 Thereafter
Long-term non-recourse debt (1)
$254,027
 $34,447
 $67,353
 $62,205
 $90,022
Capital lease obligations (2)
4,518
 132
 344
 574
 3,468
Debt-related obligations, principal$258,545
 $34,579
 $67,697
 $62,779
 $93,490
          
Interest on non-recourse debt$90,647
 $15,401
 $26,402
 $21,093
 $27,751
Interest on capital leases (2)
5,163
 790
 1,498
 1,351
 1,524
Total interest$95,810
 $16,191
 $27,900
 $22,444
 $29,275
Total debt-related obligations$354,355
 $50,770
 $95,597
 $85,223
 $122,765
          
Total non-recourse debt including interest$344,674
 $49,848
 $93,755
 $83,298
 $117,773
Operating lease obligations (3)
$3,167
 $1,235
 $1,932
 $—
 $—

(1)The 2010 Note is due August 2014, but may be extended for one 12 month period at the discretion of the Company to August 2015, if certain conditions set forth in the 2010 Note are satisfied.  Includes interest of $24.1 million on the 2010 Note to be accrued as an increase in the aggregate principal amount of the 2010 Note (“PIK Interest”).
(2)Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse with respect to defaults by the Company is limited to the value of the asset, which is collateral for the debt.  The 20102013 Term Loans are not guaranteed by the Company or its other subsidiaries, other than Phase 1 DC and CDF I, the 2013 Prospect Loan is not guaranteed by the Company or its other subsidiaries, other than Phase 1 DC and DC Holdings LLC and the KBC Facilities are not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC.
(3)(2)Principally representsRepresents the capital lease and capital lease interest for the Pavilion Theatre. The Company has remained the primary obligor on the Pavilion capital lease, and therefore, the capital lease obligation and related assets under the capital lease remain on the Company's consolidated financial statements as of DecemberMarch 31, 2011.2013. The Company has, however, entered into a sub-lease agreement with the unrelated third party purchaser which pays the capital lease and as such, has no continuing involvement in the operation of the Pavilion Theatre. This capital lease was previously included in discontinued operations.
(4)(3)Includes the remaining operating lease agreement for one IDC lease now operated and paid for by FiberMedia, consisting of unrelated third parties, which total aggregates to $3.4 million.parties.  FiberMedia currently pays the lease directly to the landlord and the Company will attempt to obtain landlord consent to assign the facility lease to FiberMedia.  Until such landlord consents areconsent is obtained, the Company will remain as the lessee.
(5)For additional Phase II Systems to be purchased from Barco with funds from the increase in the non-recourse KBC Facility.

We may continue to generate net losses for the foreseeable future primarily due to depreciation and amortization, interest on the 20102013 Term Loans and , interest on the 2010 Note,2013 Prospect Loan, software development, marketing and promotional activities and the development of relationships with other businesses.content acquisition and marketing costs. Certain of these costs, including costs of software development and marketing and promotional activities, could be reduced if necessary. The restrictions imposed by the 2010 Note2013 Term Loans and the 2010 Credit Agreement2013 Prospect Loan may limit our ability to obtain financing, make it more difficult to satisfy our debt obligations or require us to dedicate a substantial portion of our cash flow to payments on our existing debt obligations, thereby reducingobligations. The 2013 Prospect Loan requires certain screen turn performance from Phase 1 DC and Phase 2 DC. While such restrictions may reduce the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements.requirements, we do not have similar restrictions imposed upon our Software and CEG businesses. We may seek to raise additional capital for strategic acquisitions or working capital as necessary. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations or liquidity.

Seasonality

Revenues from our Phase I Deployment and Phase II Deployment segments derived from the collection of VPFs from motion picture studios are seasonal, coinciding with the timing of releases of movies by the motion picture studios. Generally, motion picture studios release the most marketable movies during the summer and the winter holiday season. The unexpected emergence of a hit movie during other periods can alter the traditional trend. The timing of movie releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or any other

39


quarter. WeWhile CEG benefits from the winter holiday season, we believe the seasonality of motion picture exhibition, however, is becoming less pronounced as the motion picture studios are releasing movies somewhat more evenly throughout the year.


37
Subsequent Events
On April 19, 2012, the Company entered into an underwriting agreement (the “First Underwriting Agreement”) with B. Riley & Co., LLC (“B. Riley”) pursuant to which B. Riley agreed to act as underwriter of 3,885,004 shares of the Company’s Class A common stock being offered, and on April 20, 2012, the Company entered into an underwriting agreement (the “Second Underwriting Agreement” and, together with the First Underwriting Agreement, the “Underwriting Agreements”) with B. Riley as Representative of the several underwriters (the “Underwriters”), pursuant to which the Underwriters agreed to act as underwriters of an additional 3,257,853 shares of the Company’s Class A common stock being offered. The securities, consisting of a total of 7,142,857 shares, were offered by the Company pursuant to a shelf registration statement on Form S-3 declared effective by the Securities and Exchange Commission on April 9, 2012 (File No. 333-179970) and an applicable prospectus supplement (the “Underwritten Offering”). Pursuant to the Underwriting Agreements and subject to the terms and conditions expressed therein (i) the Underwriters offered such securities to the public at the public offering price of $1.40 and (ii) the Company agreed to sell these securities to the Underwriters at a purchase price equal to $1.316 per share, representing a per security discount equal to 6 percent of the public offering price per security, provided that, with respect to the shares sold pursuant to the First Underwriting Agreement, the discount also included an aggregate amount equal to $100,000. At the Underwriters’ discretion, the Underwriters had a 30 day option to buy up to an additional 714,286 shares from the Company at the public offering price less the underwriting discounts and commissions to cover these sales. On April 23, 2012, the Underwriters exercised the entire over-allotment option. The Company also agreed to bear the expenses of the Underwritten Offering. The closing of the Underwritten Offering occurred on April 25, 2012, resulting in net proceeds to the Company of $10.2 million.

On April 19, 2012, the Company entered into a stock purchase agreement for the purchase of all of the issued and outstanding capital stock of New Video Group, Inc. (“New Video”), an independent home entertainment distributor of quality packaged and digital content that provides distribution services in the DVD, BD, Digital and VOD channels for more than 500 independent rights holders (the “New Video Acquisition”). The Company agreed to pay $10.0 million in cash and 2,525,417 shares of Class A common stock, subject to certain transfer restrictions, plus up to an additional $6.0 million in cash or Class A common stock, at the Company’s discretion, if certain business unit financial performance targets are met in 2013, 2014 and 2015. In addition, the Company has agreed to register the resale of the shares of Class A common stock paid as part of the purchase price. The New Video Acquisition was consummated on April 20, 2012. The Company is currently in the process of determining the fair value of assets acquired and liabilities assumed. Merger and acquisition expenses, consisting primarily of professional fees, directly related to the acquisition of New Video totaled $1.7 million, of which $1.1 million was incurred subsequent to March 31, 2012.

In connection with the purchase of New Video, the Company's consent and control agreement with a bank was terminated, thereby releasing cash proceeds partially used for the New Video Acquisition.

On April 26, 2012, the holder of 25,000 shares of the Company's Class B common stock converted all of the Class B shares into 25,000 Class A common stock shares. Accordingly, the Company no longer has any Class B common stock outstanding.

Off-balance sheet arrangements

We are not a party to any off-balance sheet arrangements, other than operating leases in the ordinary course of business, which are disclosed above in the table of our significant contractual obligations, and CDF2.Holdings. In addition, as discussed further in Note 2 to the Consolidated Financial Statements, the Company holds a 100% equity interest in CDF2 Holdings, LLC, which is an unconsolidated variable interest entity (“VIE”), which wholly owns Cinedigm Digital Funding 2, LLC,LLC; however, the Company is not the primary beneficiary of the VIE.

Impact of Inflation

The impact of inflation on our operations has not been significant to date.  However, there can be no assurance that a high rate of inflation in the future would not have an adverse impact on our operating results.


4038


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


CINEDIGM DIGITAL CINEMA CORP.
INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm
F-1
Consolidated Balance Sheets at March 31, 20122013 and 20112012
F-2
Consolidated Statements of Operations for the fiscal years ended March 31, 20122013 and 20112012
F-4
Consolidated Statements of Comprehensive Loss for the fiscal years ended March 31, 2013 and 2012
F-5
Consolidated Statements of Stockholders' Deficit for the fiscal years ended March 31, 2013 and 2012
F-6
Consolidated Statements of Cash Flows for the fiscal years ended March 31, 20122013 and 20112012
F-5F-8
Consolidated Statements of Stockholders’ (Deficit) Equity and Comprehensive Loss for the fiscal years ended March 31, 2012 and 2011
F-6
Notes to Consolidated Financial Statements
F-8F-9


4140


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To theThe Board of Directors and Stockholders
Cinedigm Digital Cinema Corp.


We have audited the accompanying consolidated balance sheets of Cinedigm Digital Cinema Corp. (the "Company"“Company”) as of March 31, 20122013 and 2011,2012, and the related consolidated statements of operations, stockholders' (deficit) equity and comprehensive loss, stockholders' deficit and cash flows for each of the years then ended.  Thesein the two-year period ended March 31, 2013. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits includeincluded consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 20122013 and 2011,2012 and the consolidated results of their operations and their cash flows for each of the years thenin the two-year period ended March 31, 2013, in conformity with accepted accounting principles generally accepted in the United States of America.



/s/ EisnerAmper LLP

Edison, New Jersey
June 15, 201219, 2013



F-1


CINEDIGM DIGITAL CINEMA CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)

    
March 31,March 31,
2012 20112013 2012
ASSETS      
Current assets      
Cash and cash equivalents$17,843
 $10,748
$13,448
 $17,843
Restricted available-for-sale investments9,477
 6,480
—
 9,477
Accounts receivable, net24,502
 13,103
31,695
 24,502
Deferred costs, current portion2,228
 2,043
1,238
 2,228
Unbilled revenue, current portion7,510
 6,562
9,989
 7,510
Prepaid and other current assets1,121
 962
6,101
 1,121
Note receivable, current portion498
 438
331
 498
Assets held for sale214
 25,170
—
 214
Total current assets63,393
 65,506
62,802
 63,393
Restricted cash5,751
 5,751
6,751
 5,751
Security deposits207
 178
218
 207
Property and equipment, net200,974
 216,562
170,511
 200,974
Intangible assets, net466
 697
12,848
 466
Capitalized software costs, net5,156
 3,362
7,083
 5,156
Goodwill5,765
 5,765
12,739
 5,765
Deferred costs, net of current portion5,080
 7,537
7,396
 5,080
Unbilled revenue, net of current portion617
 834
543
 617
Accounts receivable, long-term773
 —
1,225
 773
Note receivable, net of current portion465
 1,296
130
 465
Investment in non-consolidated entity, net1,490
 —
1,812
 1,490
Total assets$290,137
 $307,488
$284,058
 $290,137

See accompanying notes to Consolidated Financial Statements


F-2


CINEDIGM DIGITAL CINEMA CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
(continued)

    
  March 31,
  2012 2011
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY    
Current liabilities    
Accounts payable and accrued expenses $20,854
 $7,625
Current portion of notes payable, non-recourse 35,644
 28,483
Current portion of capital leases 186
 13
Current portion of deferred revenue 3,677
 3,060
Current portion of customer security deposits —
 48
Liabilities as part of assets held for sale 75
 12,564
Total current liabilities 60,436
 51,793
Notes payable, non-recourse, net of current portion 135,345
 164,071
Notes payable 87,354
 78,169
Capital leases, net of current portion 5,244
 —
Interest rate swaps 1,771
 1,971
Deferred revenue, net of current portion 11,451
 9,688
Customer security deposits, net of current portion 9
 9
Total liabilities 301,610
 305,701
Commitments and contingencies (see Note 8) 

 

Stockholders’ (Deficit) Equity    
Preferred stock, 15,000,000 shares authorized;
Series A 10% - $0.001 par value per share; 20 shares
authorized; 7 shares issued and outstanding at
March 31, 2012 and March 31, 2011, respectively.
Liquidation preference of $3,698		 3,357
 3,250
Class A common stock, $0.001 par value per share; 75,000,000
shares authorized; 37,671,487 and 32,320,287 shares issued
and 37,725,126 and 32,268,847 shares outstanding at
March 31, 2012 and March 31, 2011, respectively		 38
 32
Class B common stock, $0.001 par value per share; 15,000,000
shares authorized; 25,000 shares issued and outstanding, at March 31, 2012 and March 31, 2011, respectively		 —
 —
Additional paid-in capital 206,348
 196,420
Treasury stock, at cost; 51,440 Class A shares (172) (172)
Accumulated deficit (221,044) (197,648)
Accumulated other comprehensive loss —
 (95)
Total stockholders’ (deficit) equity (11,473) 1,787
Total liabilities and stockholders’ (deficit) equity $290,137
 $307,488



  March 31,
  2013 2012
LIABILITIES AND STOCKHOLDERS’ DEFICIT    
Current liabilities    
Accounts payable and accrued expenses $40,320
 $20,854
Current portion of notes payable, non-recourse 34,447
 35,644
Current portion of capital leases 132
 186
Current portion of deferred revenue 3,900
 3,677
Current portion of contingent consideration for business combination 1,500
 —
Liabilities as part of assets held for sale —
 75
Total current liabilities 80,299
 60,436
Notes payable, non-recourse, net of current portion 203,462
 135,345
Notes payable —
 87,354
Capital leases, net of current portion 4,386
 5,244
Interest rate derivatives 544
 1,771
Deferred revenue, net of current portion 10,931
 11,451
Contingent consideration, net of current portion 1,750
 —
Customer security deposits, net of current portion —
 9
Total liabilities 301,372
 301,610
Commitments and contingencies (see Note 9) 

 
Stockholders’ Deficit    
Preferred stock, 15,000,000 shares authorized;
Series A 10% - $0.001 par value per share; 20 shares authorized; 7 shares issued and outstanding at March 31, 2013 and 2012, respectively. Liquidation preference of $3,590		 3,466
 3,357
Class A common stock, $0.001 par value per share; 118,759,000 and 75,000,000 shares authorized; 48,448,137 and 37,722,927 shares issued and 48,396,697 and 37,671,487 shares outstanding at March 31, 2013 and 2012, respectively 48
 38
Class B common stock, $0.001 par value per share; 1,241,000 and 15,000,000 shares authorized; 1,241,000 and 1,241,000 shares issued and 0 and 25,000 shares outstanding, at March 31, 2013 and 2012, respectively —
 —
Additional paid-in capital 221,810
 206,348
Treasury stock, at cost; 51,440 Class A shares (172) (172)
Accumulated deficit (242,466) (221,044)
Total stockholders’ deficit (17,314) (11,473)
Total liabilities and stockholders’ deficit $284,058
 $290,137

See accompanying notes to Consolidated Financial Statements

F-3


CINEDIGM DIGITAL CINEMA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share data)

    
For the Fiscal Years Ended
 March 31,
For the Fiscal Year Ended March 31,
2012 20112013 2012
Revenues$76,557
 $58,439
$88,080
 $76,557
Costs and expenses:      
Direct operating (exclusive of depreciation and amortization shown below)7,042
 4,329
12,489
 7,042
Selling, general and administrative15,717
 11,777
23,123
 15,717
Provision for doubtful accounts459
 144
490
 459
Research and development175
 256
144
 175
Restructuring and transition expenses1,207
 1,403
Merger and acquisition expenses604
 —
1,267
 604
Restructuring expenses340
 1,207
Depreciation and amortization of property and equipment35,865
 31,916
36,498
 35,865
Amortization of intangible assets294
 333
1,565
 294
Total operating expenses61,363
 50,158
75,916
 61,363
Income from operations15,194
 8,281
12,164
 15,194
Interest income140
 154
48
 140
Debt prepayment fees(3,725) —
Loss on extinguishment of notes payable(7,905) —
Interest expense(29,899) (26,991)(28,314) (29,899)
Loss on extinguishment of debt—
 (4,448)
Loss on investment in non-consolidated entity(510) —
Other income (expense), net912
 (433)
Change in fair value of warrant liability—
 3,142
Change in fair value of interest rate swap200
 (1,326)
Net loss from continuing operations(13,963) (21,621)
Income (loss) on investment in non-consolidated entity322
 (510)
Other income, net653
 912
Change in fair value of interest rate derivatives1,231
 200
Loss from continuing operations before benefit from income taxes(25,526) (13,963)
Benefit from income taxes4,944
 —
Loss from continuing operations(20,582) (13,963)
Loss from discontinued operations(5,381) (8,237)(484) (5,381)
(Loss) gain on sale of discontinued operations(3,696) 622
Loss on sale of discontinued operations—
 (3,696)
Net loss(23,040) (29,236)(21,066) (23,040)
Preferred stock dividends(356) (394)(356) (356)
Net loss attributable to common stockholders$(23,396) $(29,630)$(21,422) $(23,396)
Net loss per Class A and Class B common share - basic and diluted:   
Net loss per Class A and Class B common share attributable to common shareholders - basic and diluted:   
Loss from continuing operations$(0.39) $(0.71)$(0.44) $(0.39)
Loss from discontinued operations$(0.26) $(0.25)(0.01) (0.26)
$(0.65) $(0.96)$(0.45) $(0.65)
Weighted average number of Class A and Class B common shares outstanding: Basic and diluted36,259,036
 30,794,102
Weighted average number of Class A and Class B common shares outstanding: basic and diluted47,517,167
 36,259,036

See accompanying notes to Consolidated Financial Statements

F-4


CINEDIGM DIGITAL CINEMA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWSCOMPREHENSIVE LOSS
(In thousands)

 For the Fiscal Years Ended March 31,
 2012 2011
Cash flows from operating activities   
Net loss$(23,040) $(29,236)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Loss (gain) on disposal of businesses3,696
 (622)
Depreciation and amortization of property and equipment and
     amortization of intangible assets
39,028
 37,327
Amortization of capitalized software costs759
 636
Impairment of assets1,192
 —
Amortization of debt issuance costs included in interest expense2,127
 2,040
Provision for doubtful accounts771
 581
Stock-based compensation and expenses3,418
 2,265
Change in fair value of interest rate swaps(200) 1,326
Change in fair value of warrant liability—
 (3,142)
Realized loss on restricted available-for-sale investments—
 87
PIK interest expense added to note payable7,038
 6,502
Loss on extinguishment of note payable—
 4,448
Loss on investment in non-consolidated entity510
 —
Accretion of note payable2,434
 2,410
Changes in operating assets and liabilities:   
     Accounts receivable(10,410) (6,862)
     Unbilled revenue(925) 19
     Prepaid expenses and other current assets(154) (2,474)
     Other assets663
 4,000
     Accounts payable and accrued expenses11,521
 1,937
     Deferred revenue1,830
 8,784
     Other liabilities(320) 49
Net cash provided by operating activities39,938
 30,075
Cash flows from investing activities:   
Net proceeds from disposal of businesses6,271
 —
Purchases of property and equipment(16,395) (43,306)
Purchases of intangible assets(47) (45)
Additions to capitalized software costs(2,147) (572)
Sales/maturities of restricted available-for-sale investments2,403
 6,115
Purchase of restricted available-for-sale investments(5,400) (4,676)
Investment in non-consolidated entity(2,000) —
Restricted cash—
 1,417
Net cash used in investing activities(17,315)
(41,067)
Cash flows from financing activities:   
Repayment of notes payable(7,641) (35,646)
Proceeds from notes payable15,794
 170,775
Repayment of term loans(30,151) (155,042)
Proceeds from credit facilities—
 37,601
Payments of debt issuance costs—
 (5,987)
Principal payments on capital leases(152) (130)
Net proceeds from issuance of Class A common stock7,071
 1,141
Costs associated with issuance of Class A common stock(449) (66)
Net cash (used in) provided by financing activities(15,528)
12,646
Net change in cash and cash equivalents7,095
 1,654
Cash and cash equivalents at beginning of year10,748
 9,094
Cash and cash equivalents at end of year$17,843
 $10,748
  For the Fiscal Year Ended March 31,
  2013 2012
Net loss $(21,066) $(23,040)
Other comprehensive income: Unrealized gains on available-for-sale investment securities —
 95
Comprehensive loss $(21,066) $(22,945)

See accompanying notes to Consolidated Financial Statements


F-5



CINEDIGM DIGITAL CINEMA CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY AND COMPREHENSIVE LOSSDEFICIT
(In thousands, except share data)

 
Series A
Preferred Stock
 
Class A
Common Stock
 
Class B
Common Stock
 
Treasury
Stock
 
Additional
Paid-In
 Accumulated Accumulated Other Comprehensive 
Total
Stockholders’
 Total Comprehensive
 Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Loss (Deficit) Equity Loss
Balances as of March 31, 20108
 $3,583
 28,104,235
 $28
 733,811
 $1
 (51,440) $(172) $175,937
 $(168,018) $(67) $11,292
  
Other comprehensive loss:
Unrealized losses on available-for-sale investment securities
—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (28) (28) (28)
Issuance of common stock in connection with the exercise of warrants—
 —
 1,048,633
 1
 —
 —
 —
 —
 440
 —
 —
 441
  
Issuance of common stock in connection with the cashless exercise of warrants(1) (441) 700,000
 1
 —
 —
 —
 —
 440
 —
 —
 —
  
Issuance of common stock in connection with the vesting of restricted stock—
 —
 399,898
 —
 —
 —
 —
 —
 —
 —
 —
 —
  
Issuance of common stock for the services of Directors—
 —
 267,068
 —
 —
 —
 —
 —
 —
 —
 —
 —
  
Issuance of common stock in payment of preferred stock dividends—
 —
 476,776
 1
 —
 —
 —
 —
 654
 —
 —
 655
  
Issuance of common stock for professional services of third parties—
 —
 68,028
 —
 —
 —
 —
 —
 104
 —
 —
 104
  
Issuance of common stock in connection with the issuance of stock purchase agreements—
 —
 483,278
 —
 —
 —
 —
 —
 700
 —
 —
 700
  
Conversion of Class B to Class A—
 —
 708,811
 1
 (708,811) (1) —
 —
 —
 —
 —
��—
  
Issuance of common stock for payment of bonus—
 —
 63,560
 —
 —
 —
 —
 —
 —
 —
 —
 —
  
Fair value of warrant liability upon the effectiveness of a registration statement—
 —
 —
 —
 —
 —
 —
 —
 16,054
 —
 —
 16,054
  
Accretion of preferred stock dividends—
 108
 —
 —
 —
 —
 —
 —
 (108) —
 —
 —
  
Preferred stock dividends—
 —
 —
 —
 —
 —
 —
 —
 —
 (394) —
 (394)  
Costs associated with issuance of common stock—
 —
 —
 —
 —
 —
 —
 —
 (66) —
 —
 (66)  
Stock-based compensation—
 —
 —
 —
 —
 —
 —
 —
 2,265
 —
 —
 2,265
  
Net loss—
 —
 —
 —
 —
 —
 —
 —
 —
 (29,236) —
 (29,236) (29,236)
Balances as of March 31, 20117
 $3,250
 32,320,287
 $32
 25,000
 $—
 (51,440) $(172) $196,420
 $(197,648) $(95) $1,787
 $(29,264)
 
Series A
Preferred Stock
 
Class A
Common Stock
 
Class B
Common Stock
 
Treasury
Stock
 
Additional
Paid-In
 Accumulated 
Total
Stockholders’
 Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit
Balances as of March 31, 20127
 $3,357
 37,671,487
 $38
 25,000
 $—
 (51,440) $(172) $206,348
 $(221,044) $(11,473)
Issuance of common stock in connection with the vesting of restricted stock—
 —
 94,318
 —
 —
 —
 —
 —
 (9) —
 (9)
Issuance of common stock for the services of Directors—
 —
 223,332
 —
 —
 —
 —
 —
 300
 —
 300
Issuance of common stock in connection with April 2012 offering—
 —
 7,857,143
 8
 —
 —
 —
 —
 10,992
 —
 11,000
Issuance of common stock in connection with acquisition of New Video Group—
 —
 2,525,417
 2
 —
 —
 —
 —
 3,430
 —
 3,432
Conversion of Class B common stock to Class A common stock—
 —
 25,000
 —
 (25,000) —
 —
 —
 —
 —
 —
Costs associated with issuance of common stock—
 —
 —
 —
 —
 —
 —
 —
 (1,121) —
 (1,121)
Stock-based compensation—
 —
 —
 —
 —
 —
 —
 —
 1,979
 —
 1,979
Preferred stock dividends—
 —
 —
 —
 —
 —
 —
 —
 —
 (356) (356)
Accretion of preferred stock dividends—
 109
 —
 —
 —
 —
 —
 —
 (109) —
 —
Net loss—
 —
 —
 —
 —
 —
 —
 —
 —
 (21,066) (21,066)
Balances as of March 31, 20137
 $3,466
 48,396,697
 $48
 —
 $—
 (51,440) $(172) $221,810
 $(242,466) $(17,314)

See accompanying notes to Consolidated Financial Statements


F-6


CINEDIGM DIGITAL CINEMA CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY AND COMPREHENSIVE LOSSDEFICIT
(In thousands, except share data)
Series A
Preferred Stock
 
Class A
Common Stock
 
Class B
Common Stock
 
Treasury
Stock
 
Additional
Paid-In
 Accumulated Accumulated Other Comprehensive 
Total
Stockholders’
 Total Comprehensive
Series A
Preferred Stock
 
Class A
Common Stock
 
Class B
Common Stock
 
Treasury
Stock
 
Additional
Paid-In
 Accumulated Accumulated Other Comprehensive 
Total
Stockholders’
Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Loss (Deficit) Equity LossShares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Loss Deficit
Balances as of March 31, 20117
 $3,250
 32,320,287
 $32
 25,000
 $—
 (51,440) $(172) $196,420
 $(197,648) (95) $1,787
  7
 $3,250
 32,320,287
 $32
 25,000
 $—
 (51,440) $(172) $196,420
 $(197,648) (95) $1,787
Other comprehensive gain:
Unrealized gain on available-for-sale investment securities
—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 95
 95
 95
—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 95
 95
Issuance of common stock in connection with the exercise of warrants and stock options—
 —
 93,628
 —
 —
 —
 —
 —
 129
 —
 —
 129
 
—
 —
 93,628
 —
 —
 —
 —
 —
 129
 —
 —
 129
Issuance of common stock in connection with the vesting of restricted stock—
 —
 413,055
 1
 —
 —
 —
 —
 (1) —
 —
 —
  —
 —
 413,055
 1
 —
 —
 —
 —
 (1) —
 —
 —
Issuance of common stock for the services of Directors—
 —
 253,202
 1
 —
 —
 —
 —
 426
 —
 —
 427
  —
 —
 253,202
 1
 —
 —
 —
 —
 426
 —
 —
 427
Issuance of common stock for professional services of third parties—
 —
 50,000
 —
 —
 —
 —
 —
 86
 —
 —
 86
  —
 —
 50,000
 —
 —
 —
 —
 —
 86
 —
 —
 86
Issuance of common stock warrants for professional services of third parties—
 —
 —
 —
 —
 —
 —
 —
 500
 —
 —
 500
  —
 —
 —
 —
 —
 —
 —
 —
 500
 —
 —
 500
Issuance of common stock in connection with the payment of bonus—
 —
 213,936
 —
 —
 —
 —
 —
 357
 —
 —
 357
  —
 —
 213,936
 —
 —
 —
 —
 —
 357
 —
 —
 357
Issuance of common stock in connection with a private placement—
 —
 4,338,750
 4
 —
 —
 —
 —
 6,938
 —
 —
 6,942
  —
 —
 4,338,750
 4
 —
 —
 —
 —
 6,938
 —
 —
 6,942
Costs associated with issuance of common stock—
 —
 —
 —
 —
 —
 —
 —
 (449) —
 —
 (449)  —
 —
 —
 —
 —
 —
 —
 —
 (449) —
 —
 (449)
Stock-based compensation—
 —
 —
 —
 —
 —
 —
 —
 2,049
 —
 —
 2,049
  —
 —
 —
 —
 —
 —
 —
 —
 2,049
 —
 —
 2,049
Cancellation of common stock shares—
 —
 (11,371) —
 —
 —
 —
 —
 —
 —
 —
 —
  —
 —
 (11,371) —
 —
 —
 —
 —
 —
 —
 —
 —
Preferred stock dividends—
 —
 —
 —
 —
 —
 —
 —
 —
 (356) —
 (356)  —
 —
 —
 —
 —
 —
 —
 —
 —
 (356) —
 (356)
Accretion of preferred stock dividends—
 107
 —
 —
 —
 —
 —
 —
 (107) —
 —
 —
  —
 107
 —
 —
 —
 —
 —
 —
 (107) —
 —
 —
Net loss—
 —
 —
 —
 —
 —
 —
 —
 —
 (23,040) —
 (23,040) (23,040)—
 —
 —
 —
 —
 —
 —
 —
 —
 (23,040) —
 (23,040)
Balances as of March 31, 20127
 $3,357
 37,671,487
 $38
 25,000
 $—
 (51,440) $(172) $206,348
 $(221,044) $—
 $(11,473) $(22,945)7
 $3,357
 37,671,487
 $38
 25,000
 $—
 (51,440) $(172) $206,348
 $(221,044) $—
 $(11,473)

See accompanying notes to Consolidated Financial Statements


F-7


CINEDIGM DIGITAL CINEMA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 For the Fiscal Year Ended March 31,
 2013 2012
Cash flows from operating activities   
Net loss$(21,066) $(23,040)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Gain on disposal of business—
 3,696
Depreciation and amortization of property and equipment and
     amortization of intangible assets
38,063
 39,028
Amortization of capitalized software costs1,165
 759
Impairment of assets—
 1,192
Amortization of debt issuance costs2,120
 2,127
Provision for doubtful accounts490
 771
Stock-based compensation and expenses2,279
 3,418
Change in fair value of interest rate derivatives(1,231) (200)
PIK interest expense added to note payable7,072
 7,038
Loss on extinguishment of notes payable7,905
 —
(Income) loss on investment in non-consolidated entity(322) 510
Accretion of note payable2,081
 2,434
Benefit from deferred income taxes(5,019) —
Changes in operating assets and liabilities, net of acquisition:   
     Accounts receivable860
 (10,410)
     Unbilled revenue(2,403) (925)
     Prepaid expenses and other current assets(3,967) (154)
     Other assets(1,168) 663
     Accounts payable and accrued expenses4,235
 11,521
     Deferred revenue(612) 1,830
     Other liabilities(1,113) (320)
Net cash provided by operating activities29,369
 39,938
Cash flows from investing activities:   
Net proceeds from disposal of businesses—
 6,271
Purchase of New Video Group, Inc., net of cash acquired of $6,873(3,127) —
Purchases of property and equipment(6,476) (16,395)
Purchases of intangible assets(32) (47)
Additions to capitalized software costs(3,092) (2,147)
Sales/maturities of restricted available-for-sale investments9,477
 2,403
Purchase of restricted available-for-sale investments—
 (5,400)
Investment in non-consolidated entity—
 (2,000)
Restricted cash(1,000) —
Net cash used in investing activities(4,250) (17,315)
Cash flows from financing activities:   
Repayment of notes payable(232,507) (7,641)
Proceeds from notes payable199,118
 15,794
Repayment of term loans—
 (30,151)
Payments of debt issuance costs(5,853) —
Principal payments on capital leases(151) (152)
Proceeds from issuance of Class A common stock11,000
 7,071
   Costs associated with issuance of Class A common stock(1,121) (449)
Net cash used in financing activities(29,514) (15,528)
Net change in cash and cash equivalents(4,395) 7,095
Cash and cash equivalents at beginning of year17,843
 10,748
Cash and cash equivalents at end of year$13,448
 $17,843

See accompanying notes to Consolidated Financial Statements

F-7F-8


CINEDIGM DIGITAL CINEMA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended March 31, 20122013 and 20112012
($ in thousands, except for share and per share data)

1.NATURE OF OPERATIONS

Cinedigm Digital Cinema Corp. was incorporated in Delaware on March 31, 2000 (“Cinedigm”, and collectively with its subsidiaries, the “Company”).

TheOver the past decade, the Company ishas played a significant role in the digital distribution revolution that continues to transform the media landscape. In addition to its pioneering role in transitioning almost 12,000 movie screens from traditional film prints to digital distribution, the Company continues to advance worldwide cinema services,modernization with its suite of software products allowing exhibitors and distributors to manage their newly digital businesses with efficiency, insight and lower costs. And, as a leading distributor of independent content, marketingthe Company collaborates with producers and distribution company supporting and capitalizing on the conversion of the exhibition industry from filmcommunity to digital technologymarket, source, curate and the accelerating shift in thedistribute quality content to targeted and profitable audiences through (i) theatrical releases, (ii) existing and emerging digital home entertainment market to digitalplatforms, including iTunes, Amazon Prime, Netflix, xBox, Playstation, and cable video-on-demand services from("VOD") and (iii) physical goods, such as DVDs.  The Company provides a digital cinema platform that combines technology solutions, financial adviceincluding DVD and guidance, and software services to content owners and distributors and to movie exhibitors.  Cinedigm leverages this digital cinema platform with a series of business applications that utilize the platform to capitalize on the new business opportunities created by the transformation of movie theatres into networked entertainment centers.  The two main applications provided by Cinedigm include (i) its end-to-end digital entertainment content acquisition, marketing and distribution business focused on the distribution of alternative content and independent film in theatrical and ancillary home entertainment markets; and (ii) its operational, analytical and transaction processing software applications.  Historically, the conversion of an industry from analog to digital has created new revenue and growth opportunities as well as an opening for new players to emerge to capitalize on this technological shift.Blu-ray.

The Company reports its financial results in four primary segments as follows: (1) the first digital cinema deployment (“Phase I Deployment”), (2) the second digital cinema deployment (“Phase II Deployment”), (3) digital cinema services (“Services”) and (4) media content and entertainment (“Content & Entertainment”).  The Phase I Deployment and Phase II Deployment segments are the non-recourse, financing vehicles and administrators for the Company's digital cinema equipment (the “Systems”) installed in movie theatres nationwide.  The Services segment provides services, software and support to the Phase I Deployment and Phase II Deployment segments as well as directly to exhibitors and other third party customers.  Included in these services are asset management services for a specified fee via service agreements with Phase I Deployment and Phase II Deployment as well as third party exhibitors as buyers of their own digital cinema equipment; and software license, maintenance and consulting services to Phase I and Phase II Deployment, various other exhibitors, studios and other content organizations.  These services primarily facilitate the conversion from analog to digital cinema and have positioned the Company at what it believes to be the forefront of a rapidly developing industry relating to the distribution and management of digital cinema and other content to theatres and other remote venues worldwide.  The Content & Entertainment segment, which includes our acquired wholly-owned subsidiary Cinedigm Entertainment Corp., f/k/a New Video Group, Inc. ("New Video") as described below, provides content marketing and distribution services in both theatrical and ancillary home entertainment markets to alternative and independent filmmovie content owners and to theatrical exhibitors.

On April 20, 2012, we acquiredPurchase of New Video Group, Inc. ("

On April 19, 2012, the Company entered into a stock purchase agreement for the purchase of all of the issued and outstanding capital stock of New Video"),Video, an independent home entertainment distributor of quality packaged goods entertainment and digital content that provides distribution services in the DVD, BD,Blu-ray, Digital and VOD channels for more than 500 independent rights holders (see also Note 17)(the “New Video Acquisition”). The Company paid $10.0 million in cash and 2,525,417 shares of Class A common stock at $1.51 per share, subject to certain transfer restrictions, plus up to an additional $6.0 million in cash or Class A common stock, at the Company’s discretion, if certain business unit financial performance targets are met during the fiscal years ended March 31, 2013, 2014 and 2015. In addition, the Company registered the resale of the shares of Class A common stock paid as part of the purchase price, which registration was declared effective by the Securities and Exchange Commission ("SEC") on April 2, 2013. The New Video will be integrated intoAcquisition was consummated on April 20, 2012. Merger and acquisition expenses, consisting primarily of professional fees, directly related to the New Video Acquisition totaled $1.9 million, of which $1.3 million was incurred during the fiscal year ended March 31, 2013.

The results of operations of New Video have been included in the accompanying consolidated statements of operations from the date of the acquisition within the Company's Content & Entertainment segment. The total amount of revenues and net income of New Video since the acquisition date that have been included in the consolidated statements of operations for the fiscal year ended March 31, 2013 was approximately $13.4 million and $1.5 million, respectively.

DuringThe aggregate purchase price after post-closing adjustments for 100% of the equity of New Video was $17.2 million, including cash acquired of $6.9 million.

F-9


The purchase price has been allocated to the identifiable net assets acquired as of the date of acquisition as follows:
Cash and cash equivalents $6,873
Accounts receivable 8,983
Other assets 1,142
Intangible assets subject to amortization 13,915
Goodwill 6,974
Total assets acquired 37,887
Less: Total liabilities assumed (15,661)
Less: Net deferred tax liability (5,019)
Total net assets acquired $17,207
Of the $13,915 of intangible assets subject to amortization, $9,671 was assigned to customer relationships with a useful life of 15 years, $2,769 was assigned to a content library with a useful life of five years, $1,193 was assigned to a favorable lease with a useful life of approximately four years and $282 was assigned to covenants not to compete with a useful life of two years.

The fair values assigned to intangible assets were determined through the application of various commonly used and accepted valuation procedures and methods, including the multi-period excess earnings method. These valuation methods rely on management judgment, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, peer group cost of capital and royalty rates, and other factors. The valuation of tangible assets was determined to approximate book value at the time of the New Video Acquisition. Useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows. The goodwill of $6,974 represents the premium the Company paid over the fair value of the net tangible and intangible assets acquired. Goodwill is principally attributed to the assembled workforce and synergies anticipated as a result of the New Video Acquisition.

Upon concluding the purchase price allocation for the New Video Acquisition in the fourth quarter of the fiscal year ended March 31, 2012,2013, a measurement period adjustment was made to establish a deferred tax liability with a corresponding increase in goodwill at the acquisition date. As a result of this adjustment and the assessment of its consolidated tax filing status, the Company discontinued and solddetermined it was appropriate to release a portion of its deferred tax valuation allowance established prior to the following non-core businesses:New Video Acquisition as discussed in Note 14. Accordingly, the previously reported condensed consolidated statement of operations for the three months ended June 30, 2012 should have been revised as follows:

In September 2011, the Company completed the sale of its cinema advertising services business, Unique Screen Media ("USM") to a third party, which was previously included in our Content & Entertainment segment; and
In November 2011, the Company completed the sale of the majority of assets of its Digital Media Services Division (“DMS”) digital distribution and delivery business, which was previously included in our Services segment, to a third party.
 As Reported As Adjusted Change
Statement of operations     
Loss from continuing operations before benefit from income taxes$(4,868) $(4,868) $—
Benefit from income taxes—
 5,019
 5,019
Loss from continuing operations(4,868) 151
 5,019
Net loss(5,152) (133) 5,019
Net loss attributable to common stockholders(5,241) (222) 5,019
      
Net loss per Class A and Class B common share attributable to common shareholders - basic and diluted:     
Loss from continuing operations$(0.11) $—
 $0.11
Loss from discontinued operations(0.01) (0.01) —
 $(0.12) $(0.01) $0.11

As a consequence, it was determined thatPro forma Information Related To the above former businesses met the criteria for classification as discontinued operations during the respective periods and their respective assets and liabilities met the criteria for classification as “assets held for sale” and “liabilities as partAcquisition of assets held for sale”, respectively. The consolidated financial statements and the notes to consolidated financial statements presented herein have been recast solely to reflect the adjustments resulting from these changes in classification. Please see Note 3 for further information.New Video

In additionThe following unaudited consolidated pro forma summary information for the fiscal year ended March 31, 2012 has been prepared by adjusting the historical data as set forth in the accompanying consolidated statements of operations for the for the fiscal year ended March 31, 2012 to give effect to the above,acquisition of New Video as if it had occurred at April 1, 2011. As the Company has classified certainacquisition of its businesses as discontinued operations, including the motion picture exhibition to the general public (“Pavilion Theatre”), information technology consulting services and managed network monitoring services (“Managed Services”) and hosting services and network access for other web hosting services (“Access

F-8F-10


Digital Server Assets”), all of which were separate reporting units previously included in our former "Other" segment. In August 2010,New Video was consummated near the Company sold both Managed Services and the Access Digital Server Assets to third parties. In May 2011, the Company completed the sale of certain assets and liabilitiesbeginning of the Pavilion Theatrefiscal year ended March 31, 2013, the difference between actual operating results and pro forma results for the fiscal year ended March 31, 2013 is not substantial.
  For the Fiscal Year Ended March 31,
  (Unaudited)
  2013 2012
Revenue $88,080
 $89,288
Operating income $12,164
 $17,142
Net loss $(21,066) $(21,092)
     
Net loss per share (basic and diluted) $(0.45) $(0.59)
This unaudited pro forma information is provided for informational purposes only and does not purport to a third party. As a resultbe indicative of the sales,results of operations that would have occurred if the "Other" segment no longer exists as a reportable segmentacquisition had been completed on the date set forth above, nor is it necessarily indicative of the Company. Additional information related to the Company's reportable segments can be found in Note 11.future operating results.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

For the fiscal years ended March 31, 2012 and 2011, theThe Company has incurred net losses of $23,040historically and$29,236, respectively. For the fiscal years ended March 31, 2012 and 2011, the Company’s operating activities provided cash of $39,938 and $30,075, respectively. The Company has an accumulated deficit of $221,044242,466 as of March 31, 20122013. The Company also has significant contractual obligations related to its recourse and non-recourse debt for the fiscal year 2012ended March 31, 2013 and beyond. Management expects that theThe Company willmay continue to generate net losses for the foreseeable future. Based on the Company’s cash position at March 31, 20122013, and expected cash flows from operations, as well as additional capital raises, management believes that the Company has the ability to meet its obligations through at least March 31, 2014, 2013. The Company has signed commitment letters for additional non-recourse debt capital, primarily to meet equipment requirements related to the Company’s Phase II Deployment, and there is no assurance that financing for the Phase II Deployment will be completed as contemplated or under terms acceptable to the Company or its existing stockholders.. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have a materialan adverse effect on the Company’s ability to continue as a going concern.financial position, results of operations or liquidity.

The Company’s consolidated financial statements include the accounts of Cinedigm, Access Digital Media, Inc. (“AccessDM”), Hollywood Software, Inc. d/b/a Cinedigm Software (“Software”), Core Technology Services, Inc. (“Managed Services”) (sold in August 2010), FiberSat Global Services, Inc. d/b/a Cinedigm Satellite and Support Services (“Satellite”), ADM Cinema Corporation (“ADM Cinema”) d/b/a the Pavilion Theatre (certain assets and liabilities of which were sold in May 2011), Christie/AIX, Inc. ("C/AIX") d/b/a Cinedigm Digital Cinema (“Phase 1 DC”), USM (sold in September 2011), Vistachiara Productions, Inc. f/k/a The Bigger Picture, currently d/b/a Cinedigm Content and Entertainment Group, (“CEG”),New Video, Access Digital Cinema Phase 2 Corp. (“Phase 2 DC”), Cinedigm Digital Cinema Australia Pty Ltd, Access Digital Cinema Phase 2 B/AIX Corp. (“Phase 2 B/AIX”) and, Cinedigm Digital Funding I, LLC (“CDF I”) and Cinedigm DC Holdings LLC ("DC Holdings LLC"). Content and Entertainment Group and New Video are together referred to as CEG. AccessDM and Satellite are together referred to as the DMS (the majority of which was sold in November, 2011)2011 and remaining assets of which were sold in May 2012). All intercompany transactions and balances have been eliminated in consolidation.

INVESTMENT IN NON-CONSOLIDATED ENTITY

The Company holds a indirectly owns 100% of the common equity interest inof CDF2 Holdings, LLC , which wholly owns Cinedigm Digital Funding 2, LLC (together, “CDF2”("Holdings"), which is a variable interest entityVariable Interest Entity (“VIE”), as defined in Accounting Standards Codification (“ASC”) Topic 810 ("ASC 810"), “Consolidation". CDF2commenced operations on October 18, 2011 and is in business to purchase and deploy digital projection systems to movie theatre auditoriums across the United States (See Note 6). CDF2The Company has entered into various finance agreements with multiple third parties unrelated to the Company to finance its business and has also entered into a management service agreement (“MSA”) with CDF2 Holdings, LLC, an indirect wholly-owned non-consolidated variable interest entity that is intended to be a special purpose, bankruptcy remote entity for administrative services related to the installation of these digital systems and management of contracts and administrative services for CDF2. ASC 810 requires the consolidation of VIEs by the entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE. To be a primary beneficiary, an entity must have the power to direct the activities of a VIE that most significantly impact the VIE's economic performance, among other factors. During the current period, the Company assessed the variable interests in CDF2 and determined that the Company wasit is not the primary beneficiary of CDF2Holdings in accordance with ASC 810, and it is accounting for its investment in CDF2Holdings under the equity method (See Note 6). In completing this assessment, the Company identified the activities that it considers most significant to the economic performance of CDF2 and determined that it does not have the power to direct those activities. Specifically, both the Company and a third party, which also has a variable interestaccounting. The Company's net investment in CDF2 must mutually approve all business activities and transactions that significantly impact CDF2's economic performance. As a result, CDF2Holdings is not consolidatedreflected as “Investment in non-consolidated entity, net" in the Company's results. The Company's maximum exposure to loss as it relates to CDF2 as of March 31, 2012 includes:accompanying consolidated balance sheets. See Note 6 for further discussion.

The investment in the equity of CDF2 of $1,490; and
Accounts receivable due from CDF2 for service fees under its MSA of $668.RECLASSIFICATION

DuringCertain reclassifications, principally for discontinued operations (see Note 3) have been made to the fiscal year ended March 31, 2012, the Company received $458 in aggregate revenues from CDF2, included in revenues on the accompanying consolidated financial statements of operations.


F-9


RECLASSIFICATION

The assets and liabilities of discontinued operations have been reported as assets and liabilities held for sale for all periods presented.  The consolidated balance sheet as of March 31, 2011 and consolidated statement of operations for the fiscal year ended March 31, 2011 were reclassified to conform to the current period presentation for all discontinued operations. Certain other fiscal year ending March 31, 2011 amounts have been reclassified to conform to the March 31, 20122013 presentation.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaGenerally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

F-11


Such estimates include the adequacy of accounts receivable reserves, assessment of goodwill and intangible asset impairment and valuation reserve for income taxes, among others. Actual results could differ from these estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of three months or less to be “cash equivalents.” The Company maintains bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insured limits. The Company periodically assesses the financial condition of the institutions and believes that the risk of any loss is minimal.

RESTRICTED AVAILABLE-FOR-SALE INVESTMENTS

In connection with $172,500 of term loans issued in May 2010 (See Note 7), the sale of USM in September 2011 and the sale of the majority of assets of DMS in November 2011 (See Note 3), the Company segregated $9,477 of the combined proceeds received in the transactions into an account to be used with the approval of the 2010 Note holder either (i) to support an acquisition by the Company; or (ii) to repay the 2010 Note. During the fiscal year ended March 31, 2013, these funds were released from restricted available-for-sale investments and used to finance a portion of the cost of the New Video Acquisition in April 2012 (See Note 1).

ACCOUNTS RECEIVABLE

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis. Allowance for doubtful accounts amounted to $257$699 and $73$257 as of March 31, 20122013 and 2011,2012, respectively.

Accounts receivable, long-term result from up-front activation fees with extended payment terms that are discounted to their present value at prevailing market rates.

RESTRICTED AVAILABLE-FOR-SALE INVESTMENTS

In connection with the $75,000 Senior Secured Note issued in August 2009 (See Note 7), the Company was required to segregate a portion of the proceeds into marketable securities, which was used to pay interest over the first two years and segregate a portion of proceeds from sales activities into restricted use marketable securities.  The Company classified these marketable securities as restricted available-for-sale investments and fully utilized these marketable securities to pay interest in September 2011. This segregated account has since been discontinued.

In connection with $172,500 of term loans issued in May 2010 (See Note 7), the sale of USM in September 2011 and the sale of the majority of assets of DMS in November 2011 (See Note 3), the Company segregated $9,477 of the combined proceeds received in the transactions into an account to be used with the approval of the 2010 Noteholder either (i) to support an acquisition by the Company; or (ii) to repay the 2010 Note. These funds were released from restricted available-for-sale investments and used to finance a portion of the cost of the acquisition of New Video Group, Inc. in April 2012 (See Note 17).

Restricted available-for-sale investment securities with a maturity of twelve months or less are classified as short-term and investment securities with a maturity greater than twelve months are classified as long-term. These investments are recorded at fair value. As of March 31, 2012, there were no long-term restricted available-for-sale investments.
The changes in the value of these investments are recorded in other comprehensive gain/loss in the consolidated statements of Stockholders' (Deficit) Equity and Comprehensive Loss.  During the fiscal year ended March 31, 2012, other comprehensive gain was $95. During the fiscal year ended March 31, 2011, other comprehensive loss was $28. Realized gains and losses are recorded in the consolidated statements of operations when securities mature or are redeemed.  During the fiscal years ended March 31, 2012 and 2011, the Company recognized realized losses of $92 and $87, respectively.

F-10


The carrying value and fair value of restricted available-for-sale investments were as follows:

 As of March 31, 2012
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Cash equivalent funds, money markets$9,477
 $—
 $—
 $9,477
 $9,477
 $—
 $—
 $9,477

 As of March 31, 2011
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
U.S. Treasury securities$710
 $—
 $(42) $668
Obligations of U.S. government agencies and FDIC guaranteed bank debt1,270
 —
 (51) 1,219
Cash equivalent funds, primarily money markets4,545
 —
 —
 4,545
Other interest bearing securities50
 —
 (2) 48
 $6,575
 $—
 $(95) $6,480

RESTRICTED CASH

In connection with the 2010 Term Loans issued in May 2010, (See2013 Term Loans issued in February 2013 and 2013 Prospect Loan Agreement issued in February 2013 (collectively, see Note 7), the Company maintains cash restricted for repaying interest on the Term Loans,respective loans as follows:

  As of March 31, 2012 As of March 31, 2011
Reserve account related to the 2010 Term Loans (See Note 7) $5,751
 $5,751
  As of March 31, 2013 As of March 31, 2012
Reserve account related to the 2010 Term Loans (See Note 7) $—
 $5,751
Reserve account related to the 2013 Term Loans (See Note 7) 5,751
 —
Reserve account related to the 2013 Prospect Loan Agreement (See Note 7) 1,000
 —
  $6,751
 $5,751

DEFERRED COSTS

Deferred costs primarily consist of unamortized debt issuance costs related to the 2013 Term Loans and 2013 Prospect Loan (see Note 7) which are amortized under the effective interest rate method over the terms of the respective debt.  All other unamortized debt issuance costs are amortized on a straight-line basis over the term of the respective debt. TheFor such debt, amortization on a straight-line basis is not materially different from the effective interest method.  

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:

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Computer equipment and software3-53 - 5 years
Digital cinema projection systems10 years
Machinery and equipment3-103 - 10 years
Furniture and fixtures3-63 - 6 years

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the leasehold improvements. Maintenance and repair costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized.  Upon the sale or other disposition of any property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and the gain or loss on disposal is included in the consolidated statements of operations.

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ACCOUNTING FOR DERIVATIVE ACTIVITIES

Derivative financial instruments are recorded at fair value. In May 2010, the Company settled the interest rate swap in place with respect to its previous credit facility. In June 2010, theThe Company executedhas three separate interest rate swap agreements (the “Interest Rate Swaps”) to limit the Company’s exposure to changes in interest rates related to the 20102013 Term Loans.  Additionally, the Company entered into two separate interest rate cap transactions during the fiscal year ended March 31, 2013 to limit the Company's exposure to interest rates related to the 2013 Term Loans and 2013 Prospect Loan. Changes in fair value of derivative financial instruments are either recognized in accumulated other comprehensive loss (a component of stockholders' equity (deficit))deficit) or in the consolidated statements of operations depending on whether the derivative qualifies for hedge accounting.  The Company has not sought hedge accounting treatment for these instruments and therefore, changes in the value of its Interest Rate Swaps and caps were recorded in the consolidated statements of operations (See Note 7).

FAIR VALUE MEASUREMENTS

The fair value measurement disclosures are grouped into three levels based on valuation factors:
 
Level 1 – quoted prices in active markets for identical investments
Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs, etc.)inputs)
Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)
 
Assets and liabilities measured at fair value on a recurring basis use the market approach, where prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities.

The following tables summarize the levels of fair value measurements of the Company’s financial assets:
  As of March 31, 2013
  Level 1 Level 2 Level 3 Total
Cash equivalents $1,004
 $—
 $—
 $1,004
Restricted cash 6,751
 —
 —
 6,751
Interest rate derivatives —
 (544) —
 (544)
Contingent consideration —
 —
 (3,250) (3,250)
  $7,755
 $(544) $(3,250) $3,961

 As of March 31, 2012 As of March 31, 2012
 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Cash and cash equivalents $17,843
 $—
 $—
 $17,843
Restricted available-for-sale investments 9,477
 —
 —
 9,477
 9,477
 —
 —
 9,477
Restricted cash 5,751
 —
 —
 5,751
 5,751
 —
 —
 5,751
Interest rate swap —
 (1,771) —
 (1,771)
Interest rate derivatives —
 (1,771) —
 (1,771)
 $33,071
 $(1,771) $—
 $31,300
 $15,228
 $(1,771) $—
 $13,457

Contingent consideration is a liability to the sellers of New Video based upon its business unit financial performance target in each of the fiscal years ended March 31, 2013, 2014 and 2015 (see Note 1). The estimates of the fair value of the contingent consideration arrangement was estimated by using the current forecast of New Video adjusted EBITDA, as defined by the New

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Video stock purchase agreement. That measure is based on significant inputs that are not observable in the market, which are considered Level 3 inputs.

The following summarized changes in contingent consideration liabilities in during the fiscal year ended March 31, 2013:
  As of March 31, 2011
  Level 1 Level 2 Level 3 Total
Cash and cash equivalents $10,748
 $—
 $—
 $10,748
Restricted available-for-sale investments 5,761
 51
 —
 5,812
Restricted cash 5,751
 —
 —
 5,751
Interest rate swap —
 (1,971) —
 (1,971)
  $22,260
 $(1,920) $—
 $20,340
Balance at March 31, 2012 $—
Contingent consideration at time of purchase 3,844
Change in fair value (594)
Balance at March 31, 2013 $3,250

Key assumptions include a discount rate of 7% and that New Video will achieve 100% of its business unit financial performance target in each of the three fiscal years described above, resulting in a payment of 75% of the maximum contingent consideration amount described in Note 1. During the fiscal year ended March 31, 2013, the business unit financial performance target was not achieved, therefore no amount was paid. As of March 31, 2013, the remaining amount of contingent consideration arrangements, the range of outcomes and the assumptions used to develop the estimate had not changed.

The Company’s cash and cash equivalents, accounts receivable, unbilled revenue and accounts payable and accrued expenses are financial instruments and are recorded at cost in the consolidated balance sheets. The estimated fair values of these financial instruments approximate their carrying amounts because of their short-term nature.  The carrying amount of accounts receivable, long-term and notes receivable approximates fair value based on the discounted cash flows of that instrument using current assumptions at the balance sheet date.  At March 31, 2012,2013, the estimated fair value of the Company’s fixed rate debt was $106,246 compared to aapproximated its carrying amount of $93,549.$70,151.  At March 31, 20122013 the estimated fair value of the Company’s variable rate debt was $170,420,$171,597, compared to a carrying amount of $170,990.$167,758.  The fair value of fixed rate and variable rate debt is estimated by management based upon current interest rates available to the Company at the respective balance sheet date for arrangements with similar terms and conditions.  Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of notes payable and capital lease obligations approximates fair value.


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CONCENTRATIONS OF CREDIT RISK

The Company’s customer base is primarily throughout the United States.  The Company routinely assesses the financial strength of its customers and the status of its accounts receivable and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a result, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

The Company determines its allowance by considering a number of factors, including the length of time such receivables are past due, the Company’s previous loss history, and the customer’s current ability to pay its obligation to the Company.  The Company writes off receivables when all collection efforts have been exhausted.

CONCENTRATIONS OF SUPPLIER RISK

The Company currently purchases Systems from a limited number of suppliers. The inability to obtain certain components on a timely basis would limit the Company’s ability to complete installation of such Systems in a timely manner and could affect the amount of future revenues.

IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED ASSETS

The Company reviews the recoverability of its long-lived assets and finite-lived intangible assets, when events or conditions exist that indicate a possible impairment exists. The assessment for recoverability is based primarily on the Company’s ability to recover the carrying value of its long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the assets the asset is deemed not to be recoverable and possibly impaired.  The Company then estimates the fair value of the asset to determine whether an impairment loss should be recognized.  An impairment loss will be recognized if the difference between the fair value and the carrying value of the asset exceeds its fair value.  Fair value is determined by computing the expected future discountedundiscounted cash flows.  During the fiscal years ended March 31, 20122013 and 20112012, no impairment charge from continuing operations for long-lived assets or finite-lived assets was recorded.

GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS

Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill and intangible assets with indefinite lives are not amortized; rather, they are tested for impairment on at least an annual basis.

The Company’s process of evaluating goodwill for impairment involves the determination of fair value of its goodwill reporting units: Software and CEG.  The Company conducts its annual goodwill impairment analysis during the fourth quarter of each fiscal year, measured as of March 31, unless triggering events occur which require goodwill to be tested at another date.

Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about the Company’s strategic plans with regard to its operations. To the extent additional information arises, market conditions change or the Company’s strategies change, it is possible that the conclusion regarding whether the Company’s remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on the Company’s consolidated financial position or results of operations.

The Company applies the Financial Accounting Standards Board's ("FASB") guidance when testing goodwill for impairment which permits the Company to make a qualitative assessment of whether goodwill is impaired, or opt to bypass the qualitative assessment, and proceed directly to performing the first step of the two-step impairment test. If the Company performs a qualitative assessment and concludes it is more likely than not that the fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired and the two-step impairment test is unnecessary. However, if the Company concludes otherwise, it is then required to perform the first step of the two-step impairment test.

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The Company has the unconditional option to bypass the qualitative assessment for any reporting unit and proceed directly to performing the first step of the goodwill impairment test. The Company may resume performing the qualitative assessment in any subsequent period.

For reporting units where we decide to perform a qualitative assessment, our management assesses and makes judgments regarding a variety of factors which potentially impact the fair value of a reporting unit, including general economic conditions, industry and market-specific conditions, customer behavior, cost factors, our financial performance and trends, our strategies and business plans, capital requirements, management and personnel issues, and our stock price, among others. Management

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then considers the totality of these and other factors, placing more weight on the events and circumstances that are judged to most affect a reporting unit's fair value or the carrying amount of its net assets, to reach a qualitative conclusion regarding whether it is more likely than not that the fair value of a reporting unit exceeds its carrying amount.

For reporting units where we decide to perform a quantitative testing approach in order to test goodwill, a determination of the fair value of our reporting units is required and is based, among other things, on estimates of future operating performance of the reporting unit and/or the component of the entity being valued. The Company is required to complete an impairment test for goodwill and record any resulting impairment losses at least on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, (“also known as impairment indicators”).indicators. This impairment test includes the projection and discounting of cash flows, analysis of our market factors impacting the businesses the Company operates and estimating the fair values of tangible and intangible assets and liabilities. Estimating future cash flows and determining their present values are based upon, among other things, certain assumptions about expected future operating performance and appropriate discount rates determined by management.

The discounted cash flow methodology establishes fair value by estimating the present value of the projected future cash flows to be generated from the reporting unit. The discount rate applied to the projected future cash flows to arrive at the present value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows.  The discounted cash flow methodology uses our projections of financial performance for a five-year period.  The most significant assumptions used in the discounted cash flow methodology are the discount rate the terminal value and expected future revenues and gross margins, which vary among reporting units. The market participant based WACCweighted average cost of capital for each unit gives consideration to factors including, but not limited to, capital structure, historic and projected financial performance, and size.

The market multiple methodology establishes fair value by comparing the reporting unit to other companies that are similar, from an operational or industry standpoint and considers the risk characteristics in order to determine the risk profile relative to the comparable companies as a group.  The most significant assumptions are the market multiplies and the control premium. The Company has elected not to apply a control premium to the fair value conclusions for the purposes of impairment testing.

The Company then assigns a weighting to the discounted cash flows and market multiple methodologies to derive the fair value of the reporting unit.  The income approach is weighted 70% and the market approach is weighted 30% to derive the fair value of the reporting unit.  The weightings are evaluated each time a goodwill impairment assessment is performed and give consideration to the relative reliability of each approach at that time.

In the fourth quarter of the fiscal year ended March 31, 2012, in conjunction with management's annual testing of goodwill, the Company early adopted new accounting guidance which permits a qualitative assessment of goodwill and performed such assessment for its Software and CEG reporting units.

During the annual testing of goodwill for the fiscal year ended March 31, 2012,2013, management performed the qualitativequantitative assessment for its Software and CEG reporting units. The qualitative assessment includedIn determining fair value, we make various assumptions, including our expectations of future cash flows based on projections or forecasts derived from our analysis of business prospects, economic or market trends and any regulatory changes that may occur. We estimate the review of changesfair value of the following: recent financial performance, financial forecasts,reporting unit using a net present value methodology, which is dependent on significant assumptions related to estimated future discounted cash flows, discount rates carrying amount, market values of comparable companies, industry conditions, and general economic conditions. Furthermore, management consideredtax rates. Our assumptions included growth rates in adjusted EBITDA that are derived from the results of the most recent two-step quantitative impairment test completed for a reporting unit (in this instanceCompany's budget for the Company'sfiscal year ended March 31, 2014 with flat growth rates of approximately 2% and 3% for Software and CEG, reporting units, as ofrespectively, for the fiscal years thereafter through the fiscal year ending March 31, 2011)2018. Further, we assumed a market-based weighted average cost of capital of 10% and 20% for Software and CEG, respectively, to discount cash flows and a blended federal and state tax rate of 40%. Management concluded

We determined that it was more likely than not that the estimated fair value of the Software andreporting unit exceeded its carrying value, inclusive of goodwill of $4,197, by over 100%. We determined that the fair value of the CEG reporting unit's equity exceedsunit exceeded its carrying value, inclusive of goodwill of $8,542, by over 100%. Thus, a significant decrease in fair value would be required before the respectivegoodwill balance at these reporting units would have a carrying value in excess of the fair value. As such, no further analysis of the Software and CEG reporting units was required and no goodwill impairment was recorded.recorded for the fiscal year ended March 31, 2013. There is, however, a significant risk of future impairment if management's expectations of future cash flows are not achieved.


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Information related to the goodwill allocated to the Company’s continuing operationsCompany's reportable segments is detailed below:
  Phase I Phase II Services Content & Entertainment Corporate Consolidated
As of March 31, 2012 $—
 $—
 $4,197
 $1,568
 $—
 $5,765
As of March 31, 2011 $—
 $—
 $4,197
 $1,568
 $—
 $5,765

For the fiscal year ended March 31, 2011, no impairment charge was recorded for goodwill related to the Company's continued operations.

As of March 31, 2012, the Company’s finite-lived intangible assets consisted of customer relationships and agreements, theatre

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relationships, covenants not to compete, trade names and trademarks.  For the fiscal years ended March 31, 2012 and 2011, no impairment charge was recorded for intangible assets.
  Phase I Phase II Services Content & Entertainment Corporate Consolidated
As of March 31, 2012 $—
 $—
 $4,197
 $1,568
 $—
 $5,765
Goodwill resulting from the New Video Acquisition —
 —
 —
 6,974
 —
 6,974
As of March 31, 2013 $—
 $—
 $4,197
 $8,542
 $—
 $12,739

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Internal Use Software

The Company accounts for internal use software development costs based on three distinct stages.  The first stage, the preliminary project stage, includes the conceptual formulation, design and testing of alternatives.  The second stage, or the program instruction phase, includes the development of the detailed functional specifications, coding and testing.  The final stage, the implementation stage, includes the activities associated with placing a software project into service.  All activities included within the preliminary project stage are considered research and development and expensed as incurred.  During the program instruction phase, all costs incurred until the software is substantially complete and ready for use, including all necessary testing, are capitalized, Capitalized costs are amortized when the software is ready for its intended use on a straight-line basis over three to five years.

Software to be Sold, Licensed or Otherwise Marketed

Software development costs for software to be sold, licensed or otherwise marketed that are incurred subsequent to establishing technological feasibility, when it is determined that the software can be produced to meet its design specifications, are capitalized until the product is available for general release. Amounts capitalized as software development costs are amortized using the greater of recognized revenues during the period compared to the total estimated revenues to be earned or on a straight-line basis over estimated lives, ranging from three to fivegenerally 5 years, except for deployment software which is for ten years.10 years. The Company reviews capitalized software costs to determine if any impairment exists on a periodic basis. Amortization of capitalized software development costs, included in direct operating costs, for the fiscal yearsended March 31, 20122013 and 20112012 amounted to $7591,165 and $636759, respectively.

REVENUE RECOGNITION

Phase I Deployment and Phase II Deployment

Virtual print fees (“VPFs”) are earned pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio to Phase 1 DC, CDF I and to Phase 2 DC when movies distributed by the studio are displayed on screens utilizing the Company’s Systems installed in movie theatres.  VPFs are earned and payable to Phase 1 DC and CDF I based on a defined fee schedule with a reduced VPF rate year over year until the sixth year (calendar 2011) at which point the VPF rate remains unchanged through the tenth year.  One VPF is payable for every digital title displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period in which the digital title first plays on a System for general audience viewing in a digitally-equipped movie theatre, as Phase 1 DC’s, CDF I’s and Phase 2 DC’s performance obligations have been substantially met at that time.

Phase 2 DC’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed; however, Phase 2 DC may no longer collect VPFs once “cost recoupment,” as defined in the agreements, is achieved.  Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase 2 DC have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including the Company’s service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter, plus a compounded return on any billed but unpaid overhead and ongoing costs, of 15% per year.  Further, if cost recoupment occurs before the end of the eighth contract year, a one-time “cost recoupment bonus” is payable by the studios to the Company.  Any other cash flows, net of expenses, received by Phase 2 DC following the achievement of cost recoupment are required to be returned to the distributors on a pro-rata basis. At this time, the Company cannot estimate the timing or probability of the achievement of cost recoupment.

Alternative content fees (“ACFs”) are earned pursuant to contracts with movie exhibitors, whereby amounts are payable to Phase 1 DC, CDF I and to Phase 2 DC, generally either a fixed amount or as a percentage of the applicable box office revenue derived from the exhibitor’s showing of content other than feature films,movies, such as concerts and sporting events (typically referred to as “alternative content”). ACF revenue is recognized in the period in which the alternative content first opens for audience viewing.

Revenues are deferred for up front exhibitor contributions and are recognized over the cost recoupment period, which is a period of expected to be ten years.

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Services

For software multi-element licensing arrangements that do not require significant production, modification or customization of the licensed software, revenue is recognized for the various elements as follows: revenue for the licensed software element is recognized upon delivery and acceptance of the licensed software product, as that represents the culmination of the earnings process and the Company has no further obligations to the customer, relative to the software license. Revenue earned from consulting

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services is recognized upon the performance and completion of these services. Revenue earned from annual software maintenance is recognized ratably over the maintenance term (typically one year).

Revenue is deferred in cases where:  (1) a portion or the entire contract amount cannot be recognized as revenue, due to non-delivery or pre-acceptance of licensed software or custom programming, (2) uncompleted implementation of application service provider arrangements (“ASP Service”), or (3) unexpired pro-rata periods of maintenance, minimum ASP Service fees or website subscription fees. As license fees, maintenance fees, minimum ASP Service fees and website subscription fees are often paid in advance, a portion of this revenue is deferred until the contract ends. Such amounts are classified as deferred revenue and are recognized as earned revenue in accordance with the Company’s revenue recognition policies described above.

Exhibitors who will purchasepurchased and own Systems using their own financing in the Phase II Deployment, will paypaid an upfront activation fee that is generally $2$2 thousand per screen to the Company (the “Exhibitor-Buyer Structure”).  These upfront activation fees are recognized in the period in which these exhibitor owned Systems are ready for content, as the Company has no further obligations to the customer, and are generally paid quarterly from VPF revenues over approximately one year.  Additionally, the Company recognizes activation fee revenue of between $1$1 thousand and $2$2 thousand on Phase 2 DC Systems and for Systems installed by CDF2Holdings upon installation and such fees are generally collected upfront upon installation. The Company will then manage the billing and collection of VPFs and will remit all VPFs collected to the exhibitors, less an administrative fee that will approximate up to 10% of the VPFs collected.

The administrative fee related to the Phase I Deployment approximates 5% of the VPFs collected.collected and an incentive service fee equal to 2.5% of the VPFs earned by Phase 1 DC. This administrative fee is recognized in the period in which the billing of VPFs occurs, as performance obligations have been substantially met at that time.

Content & Entertainment

CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video-on-demand, and physical goods (e.g. DVD and Blu-ray Disc). The fee rate earned by the Company varies depending upon the nature of the agreements with the platform and content providers. Generally, revenues are recognized at the availability date of the content for a subscription digital platform, at the time of shipment for physical goods, or point-of-sale for transactional and video-on-demand services.

CEG also has contracts for the theatrical distribution of third party feature filmsmovies and alternative content. CEG’s distribution fee revenue and CEG's participation in box office receipts is recognized at the time a feature filmmovie and alternative content is viewed. CEG has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third party feature films’movies’ or alternative content’s theatrical release date.

DIRECT OPERATING COSTS

Direct operating costs consist of facility operating costs such as rent, utilities, real estate taxes, repairs and maintenance, royalty expenses, advertising, insurance and other related expenses, direct personnel costs, subcontractors and amortization of capitalized software development costs.

ADVERTISING

Advertising costs are expensed as incurred and are included in selling, general and administrative expenses. For the fiscal yearsended March 31, 20122013 and 20112012, the Company recorded advertising costs of $873$153 and $711,$321, respectively.

STOCK-BASED COMPENSATION

ForDuring the fiscal yearsended March 31, 20122013 and 20112012, the Company recorded employee and director stock-based compensation from continuing operations expense of $1,9952,279 and $2,1592,832, respectively.

The weighted-average grant-date fair value of options granted during the fiscal yearsended March 31, 20122013 and 20112012 was $1.77$0.88 and $1.45,$1.77, respectively. There were no stock options exercised during the fiscal years yearended March 31, 2013. During the fiscal year ended March 31, 2012, there were exercises of 93,628 and 2011.stock options.

In December 2010, the Company hired a new CEO and issued options to purchase 4,500,000 shares of Class A Common Stock, 1,500,000 of which carry an exercise price of $1.50, $1.50, 2,500,000 of which carry an exercise price of $3.00,$3.00, and 500,000 of which

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carry an exercise price of $5.00.$5.00. One-third of the options in each tranche began vesting in December 2011 and will finish in

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December 2013 and all of the options have a term of ten (10) years.10 years. These options were issued outside of the Company’s equity incentive plan as an inducement for entering into employment with the Company. The weighted-average grant-date fair value of these options granted was $0.81.$0.81.

The Company estimated the fair value of stock options at the date of each grant using a Black-Scholes option valuation model with the following assumptions:
 As of March 31, For the Fiscal Year Ended March 31,
Assumptions for Option Grants 2012 2011 2013 2012
Range of risk-free interest rates 0.8 – 2.2%
 1.4% – 2.3%
 0.6 - 0.9%
 0.8 - 2.2%
Dividend yield —
 —
 —
 —
Expected life (years) 5
 5
 5
 5
Range of expected volatilities  76.3% – 78.1%
 77.8% – 78.8%
  74.0 - 76.0%
 76.3 - 78.1%

The risk-free interest rate used in the Black-Scholes option pricing model for options granted under the Company’s stock option plan awards is the historical yield on U.S. Treasury securities with equivalent remaining lives. The Company does not currently anticipate paying any cash dividends on common stock in the foreseeable future. Consequently, an expected dividend yield of zero is used in the Black-Scholes option pricing model.  The Company estimates the expected life of options granted under the Company’s stock option plans using both exercise behavior and post-vesting termination behavior, as well as consideration of outstanding options.   The Company estimates expected volatility for options granted under the Company’s stock option plans based on a measure of historical volatility in the trading market for the Company’s common stock.

Employee and director stock-based compensation expense including results of from discontinued operations, related to the Company’s stock-based awards was as follows:
 For the Fiscal Years Ended March 31,
 2012 2011
Direct operating$58
 $54
Selling, general and administrative1,875
 2,161
Research and development116
 50
 $2,049
 $2,265

INCOME TAXES

Income taxes have been provided for under the liability method.  Deferred tax assets and liabilities are determined based on the difference between the financial statement and the tax basis of assets and liabilities as measured by the enacted rates which will be in effect when the differences reverse.  The Company provides a full valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that the deferred tax asset will not be realized.

The Company recognizes a tax benefit from uncertain positions only if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authorities’ widely understood administrative practices and precedents.  The tax benefits recognized from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.  At March 31, 2012 and 2011, the Company did not recognize any tax benefits from uncertain tax positions.
 For the Fiscal Year Ended March 31,
 2013 2012
Direct operating$82
 $58
Selling, general and administrative2,054
 2,658
Research and development143
 116
 $2,279
 $2,832

NET LOSS PER SHARE

Basic and diluted net loss per common share has been calculated as follows:

Basic and diluted net loss per common share =Net loss + preferred dividends
 
Weighted average number of common stock
 outstanding during the period

Shares issued and any shares that are reacquired during the period are weighted for the portion of the period that they are outstanding.

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The Company incurred net losses for each of the fiscal yearsended March 31, 20122013 and 20112012 and, therefore, the impact of dilutive potential common shares from outstanding stock options and warrants, restricted stock, and restricted stock units, totaling 20,372,98820,594,108 shares and 23,845,57120,372,988shares as of March 31, 20122013 and 20112012, respectively, were excluded from the computation as it would be anti-dilutive.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Standards

In May 2011,July 2012, the FASB issued a new accounting standard update, which amends guidance allowing an entity to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite – lived intangible asset is impaired. This assessment should be used as a basis for determining whether it is necessary to perform the quantitative impairment test. An entity would not be required to calculate the fair value measurement guidance and includes some enhanced disclosure requirements. The most significant change in disclosures is an expansion of the information requiredintangible asset and perform the quantitative test unless the entity determines, based upon its qualitative assessment, that it is more likely than not that

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its fair value is less than its carrying value. The update provides further guidance of events and circumstances that an entity should consider in determining whether it is more likely than not that the fair value of an indefinite – lived intangible asset is less than its carrying amount. The update also allows an entity the option to bypass the qualitative assessment for Level 3 measurements based on unobservable inputs. The standardany indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. This update is effective for fiscal yearsannual and interim periods beginning after DecemberSeptember 15, 2011.2012, with early adoption permitted. The Company will adoptadopted this standard Aprilon October 1, 2012 and does not expect the2012. The adoption of this standard todid not have a material impact on the consolidated financial statements and disclosures.

In June 2011,October 2012, the FASB codifiedissued a new accounting standard update, which aligns the guidance on fair value measurements in the impairment test of unamortized film costs with the guidance on fair value measurements in other instances within GAAP. The amendments in this update eliminate certain requirements related to the presentationan impairment assessment of comprehensive income. The guidance requires entities to present net incomeunamortized film costs and other comprehensive income in a single continuous statement of comprehensive income or in two separate, but consecutive, statements. Theclarify when unamortized film costs should be assessed for impairment. This update does not add any new guidance does not changeto the components that are recognized in net income and the components that are recognized in other comprehensive income. Currently, the Company presents comprehensive income in its statements of equity. The provisions of this guidance areFASB's codification for Entertainment - Films. This update is effective for the Company's impairment assessments performed on or after December 15, 2012. The Company beginning Apriladopted this standard on January 1, 2012 and are required to be applied retroactively.

In September 2011, the FASB codified guidance related to the testing of goodwill for impairment.2013. The guidance provides entities with the option to first assess qualitative factors to determine whether the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines the fair value of a reporting unit is not less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test. Entities have the option of bypassing the qualitative analysis in any period and proceeding directly to the two-step impairment test. The provisionsadoption of this guidance are effective forstandard did not have a material impact on the Company April 1, 2012 but are permitted to be adopted earlier.

In the fourth quarter of the fiscal year ended March 31, 2012, in conjunction with management's annual testing of goodwill, the Company early adopted the new accounting guidance.consolidated financial statements and disclosures.

3.ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

USM had contracts with exhibitors to display pre-show advertisements on their screens, in exchange for certain fees paid to the exhibitors. USM then contracted with businesses of various types to place their advertisements in select theatre locations, designed the advertisement, and placed it on-screen for specific periods of time, generally ranging from three to twelve months.  The Company determined that this business did not meet its strategic plan and sold USM in September 2011 for $6,000,$6,000, before transaction expenses of $226,$226, and recognized a gain on the sale of $846$846 for the fiscal year ended March 31, 2012.2012. USM was formerly part of the Content & Entertainment segment.

In November 2011, pursuant to an asset purchase agreement, the Company sold to a third party the majority oftheatrical assets of Cinedigm'sthe Company's physical and electronic distribution business and trailer distribution business for $1,000$1,000 before transaction expenses of $277,$277, and recognized a loss on the sale of $4,606$4,606 for the fiscal year ended March 31, 2012. Concurrently on completion of this transaction, the Company classified $200 of net assets of its non-theatrical DMS business which were not sold as part of this transaction as held for sale and classified these assets as discontinued operations which the Company intends to sell within the next twelve months.2012. These DMS non-theatrical assets were written down in value by $800$800 during the fiscal year ended March 31, 2012.2012. DMS was formerly part of the Services segment.

In May 2012, pursuant to an asset purchase agreement, the Company sold to a third party the remaining net assets of its non-theatrical DMS business for $200. The Pavilion Theatre generates movie theatre admission and concession revenues. Movie theatre admission revenues are recognizedCompany did not recognize a gain or loss on the datesale. In connection with the sale and in consideration of sale, asother payments made by the related movie is viewedCompany on that date and the Company's performance obligation is met at that time. Concession revenues consist of food and beverage sales and are also recognized on the date of sale. The Pavilion Theatre, while once a digital cinema test site and showcase for digital cinema technology, is no longer needed in that capacity due to widespread adoptionbehalf of the technology. Management decided to pursue itsbuyer, the Company received a secured promissory note from the third party for $260representing the sale duringproceeds and other amounts advanced by the fourth quarterCompany on behalf of the year ended March 31, 2010third party. The promissory note, which bears interest of 5% per annum, was originally due on October 19, 2012 and classified the Pavilion Theatrehas an outstanding balance of $8 as assets held for sale in the year ended March 31, 2010 and reported the results of Pavilion Theatre as discontinued operation for the year ended March 31, 2010 and all subsequent periods.

During the quarter ended September 30, 2010, the Company experienced a reduction in its estimated sales price of the Pavilion Theatre as well as decline in its operating performance. Accordingly, the Company recorded a goodwill impairment charge of

F-18


$1,763. As of March 31, 20112013, there was no goodwill associated with the Pavilion Theatre.

In May 2011, the Company completed the sale of certain assets and liabilities of the Pavilion Theatre for $150 and from that point forward, it. The promissory note will not be operated by the Company. Based on the final sales price, the Company recognized a long-lived asset impairment charge of $730 in the fourth quarter of the fiscal year ended March 31, 2011. In addition, the Company recognized a gain on disposal of $64.

In addition, assets held for sale and discontinued operations includes Managed Services and Access Digital Server Assets. In August 2010, the Company sold the stock of Managed Services and the Access Digital Server Assetssatisfied in exchange for $268 in cash payments and $1,150 in a note receivable under a 46-month service agreement (the "Managed Services Agreement"). The note receivable will be repaid through service credits pursuant to the Managed Services Agreement under which the buyer will continue to perform certain information technology related services for the Company. The Access Digital Server Assets currently host the Company's websites, and provide networking and other information technology services to the Company. If there is an event of defaultprovided by the buyer or if the Managed Services Agreement is terminated pursuant to its terms, the buyer would be required to pay all of the then outstanding (unused) service credits in cash, with immediate acceleration. The results of the Other segment have been reported in discontinued operation for the fiscal year endedthird party through MarchDecember 31, 20112013.

With the sale of the remaining net assets of its non-theatrical DMS business, there are no assets or liabilities held for sale as of March 31, 2013. The assets and liabilities held for sale as of March 31, 2012were comprised of the following:
 As of March 31,
 2012 2011
Accounts receivable, net and notes receivable$14
 $6,759
Prepaid expenses and other current assets—
 529
Other assets—
 954
Capitalized software costs, net—
 405
Property and equipment, net200
 12,237
Goodwill and intangible assets, net—
 4,286
Assets held for sale$214
 $25,170
Accounts payable and accrued expenses$75
 $3,165
Notes payable—
 142
Capital leases—
 5,625
Deferred revenue and other—
 3,632
Liabilities as part of assets held for sale$75
 $12,564

At March 31, 2012, the assets and liabilities held for sale are comprised entirely of the assets and liabilities of DMS.

Certain assets and liabilities of the Pavilion Theatre were sold in May 2011. The Company has remained the primary obligator on the Pavilion capital lease and therefore, the capital lease obligation and related assets under the capital lease will remain with the Company.
  As of March 31, 2012
Accounts receivable, net and notes receivable $14
Property and equipment, net 200
Assets held for sale $214
Accounts payable and accrued expenses $75
Liabilities as part of assets held for sale $75


F-19


The resultsFor the fiscal year ended March 31, 2013, the loss from discontinued operations is comprised of DMS. There is no tax provision or benefit related to any of the Pavilion Theatre,discontinued operations. For the fiscal year ended March 31, 2012, the loss from discontinued operations is comprised of USM, DMS Managed Services and the Access Digital Server Assets have been reported as discontinued operations for all periods presented.Pavilion Theatre. The loss from discontinued operations was as follows:
 For the Fiscal Year Ended March 31,
 2013 2012
Revenues$59
 $11,484
Costs and Expenses:   
Direct operating (exclusive of depreciation and amortization shown below)164
 8,187
Selling, general and administrative195
 4,494
Provision for doubtful accounts184
 312
Research and development—
 6
Impairment of assets—
 800
Depreciation of property and equipment—
 1,957
Amortization of intangible assets—
 912
Total operating expenses543
 16,668
Loss from operations(484) (5,184)
Interest expense—
 (185)
Other expense, net—
 (12)
Loss from discontinued operations$(484) $(5,381)

 For the Fiscal Years Ended March 31,
 2012 2011
Revenues$11,484
 $26,737
Costs and Expenses:   
Direct operating (exclusive of depreciation and amortization shown below)8,187
 18,384
Selling, general and administrative4,494
 7,181
Provision for doubtful accounts312
 483
Research and development6
 34
Depreciation of property and equipment1,957
 2,570
Loss on disposal of assets—
 120
Amortization of intangible assets912
 2,558
Impairment of long-lived assets800
 730
Impairment of goodwill—
 1,763
Total operating expenses16,668
 33,823
Loss from operations(5,184) (7,086)
Interest expense(185) (1,036)
Other expense, net(12) (115)
Loss from discontinued operations$(5,381) $(8,237)

Note: Included in total operating expenses from discontinued operations for the fiscal years ended March 31, 2012 and 2011 was employee stock-based compensation expense of $54 and $106, respectively.

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4.CONSOLIDATED BALANCE SHEET COMPONENTS


ACCOUNTS RECEIVABLE

Accounts receivable, net consisted of the followingfollowing:
As of March 31,As of March 31,
2012 20112013 2012
Trade receivables$24,759
 $13,176
$32,394
 $24,759
Allowance for doubtful accounts(257) (73)(699) (257)
Total accounts receivable, net$24,502
 $13,103
$31,695
 $24,502

PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consisted of the following:
 As of March 31,
 2013 2012
Non-trade accounts receivable$3,079
 $234
Prepaid royalties2,097
 —
Prepaid insurance196
 112
Prepaid inventory127
 —
Other prepaid expenses602
 775
Total prepaid and other current assets$6,101
 $1,121


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PROPERTY AND EQUIPMENT

Property and equipment, net was comprisedconsisted of the following:
As of March 31,As of March 31,
2012 20112013 2012
Leasehold improvements$533
 $418
$1,108
 $533
Computer equipment and software7,754
 1,541
7,612
 7,754
Digital cinema projection systems355,664
 339,650
360,651
 355,664
Machinery and equipment191
 51
592
 191
Furniture and fixtures342
 317
556
 342
364,484
 341,977
370,519
 364,484
Less - accumulated depreciation and amortization(163,510) (125,415)(200,008) (163,510)
Total property and equipment, net$200,974
 $216,562
$170,511
 $200,974

For the fiscal years ended March 31, 20122013 and 2011,2012, total depreciation and amortization of property and equipment amounted to $35,86536,498 and $31,91635,865, respectively.  For the fiscal years ended March 31, 20122013 and 2011,2012, the amortization of the Company’s capital leases, and included in depreciation and amortization of property and equipment, amounted to $342239 and $12342, respectively.

INTANGIBLE ASSETS

Intangible assets, net consisted of the following:

 As of March 31, 2013
 Gross Carrying Amount Accumulated Amortization Net Amount Useful Life (years)
Trademarks$168
 $(110) $58
 3
Corporate trade names279
 (272) 7
 2-10
Customer relationships and contracts11,279
 (2,199) 9,080
 3-15
Theatre relationships550
 (206) 344
 10-12
Covenants not to compete2,121
 (1,968) 153
 2-5
Content library2,769
 (508) 2,261
 5
Favorable lease agreement1,193
 (248) 945
 4
 $18,359
 $(5,511) $12,848
  

 As of March 31, 2012
 Gross Carrying Amount Accumulated Amortization Net Amount Useful Life (years)
Trademarks$136
 $(79) $57
 3
Corporate trade names279
 (260) 19
 2-10
Customer relationships and contracts1,608
 (1,608) —
 3-5
Theatre relationships550
 (160) 390
 10-12
Covenants not to compete1,839
 (1,839) —
 3-5
 $4,412
 $(3,946) $466
  


F-21


 As of March 31, 2011
 Gross Carrying Amount Accumulated Amortization Net Amount Useful Life (years)
Trademarks$72
 $(58) $14
 3
Corporate trade names279
 (224) 55
 2-10
Customer relationships and contracts1,608
 (1,443) 165
 3-5
Theatre relationships550
 (125) 425
 10-12
Covenants not to compete1,839
 (1,801) 38
 3-5
 $4,348
 $(3,651) $697
  

For the fiscal years ended March 31, 20122013 and 20112012, amortization expense amounted to $294$1,565 and $333,$294, respectively.  The Company did not record any impairment of intangible assets during the fiscal years ended March 31, 20122013 and 20112012.
 

F-21


Amortization expense on intangible assets for the next five fiscal years is estimated as follows:
For the fiscal years ending March 31,
2013$106
2014$85
$1,689
2015$54
$1,551
2016$54
$1,524
2017$54
$1,358
2018$894

CAPITALIZED SOFTWARE COSTS, NET

Capitalized software costs, net consisted of the following:
As of March 31,As of March 31,
2012 20112013 2012
Capitalized software$10,573
 $7,800
$13,665
 $10,573
Less - accumulated amortization(5,417) (4,438)(6,582) (5,417)
Total capitalized software costs, net$5,156
 $3,362
$7,083
 $5,156

For the years ended March 31, 20122013 and 20112012, amortization of capitalized software costs, which is included in direct operating costs, amounted to $7591,165 and $636759, respectively.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:
As of March 31,As of March 31,
2012 20112013 2012
Accounts payable$15,658
 $4,877
$18,289
 $15,658
Amounts due to customers/producers14,452
 —
Accrued compensation and benefits2,244
 1,342
1,485
 2,244
Accrued taxes payable170
 167
258
 170
Interest payable317
 82
987
 317
Accrued restructuring and transition expenses953
 —
—
 953
Accrued other expenses1,512
 1,157
4,849
 1,512
Total accounts payable and accrued expenses$20,854
 $7,625
$40,320
 $20,854


F-22


5.NOTES RECEIVABLE

Notes receivable consisted of the following:
 As of March 31, 2012 As of March 31, 2011 As of March 31, 2013 As of March 31, 2012
Note Receivable (as defined below) Current Portion Long Term Portion Current Portion Long Term Portion Current Portion Long Term Portion Current Portion Long Term Portion
Exhibitor Install Notes $170
 $465
 $107
 $608
 $41
 $130
 $170
 $465
Managed Services Note 298
 —
 331
 688
 282
 —
 298
 —
Other 30
 —
 —
 —
 8
 —
 30
 —
 $498
 $465
 $438
 $1,296
 $331
 $130
 $498
 $465

In connection with Phase 1 DC’s Phase I Deployment, the Company agreed to provide financing to certain motion picture exhibitorstheatres upon the billing to the motion picture exhibitors by Christie for the installation costs associated with the placement of Systems in movie theatres.  In April 2006, certain motion picture exhibitors agreed to issue to the Company two8% notes receivable for an aggregate of $1,287$1,287 (the “Exhibitor Install Notes”). One of the 8% notes was subsequently paid off. Under the Exhibitor Install Notes, the motion picture exhibitors are required to make monthly interest only payments through October 2007 and quarterly principal and interest

F-22


payments thereafter through August 2009 and August 2017, respectively. As of March 31, 20122013 and 20112012, the outstanding balancebalances of the Exhibitor Install Notes was $635were $171 and $715635, respectively.

In August 2010, in connection with the sale of Core Technology Services, Inc. ("Managed ServicesServices") and the Access Digital Server Assets the Company entered into a $1,150$1,150 note receivable (the "Managed Services Note") as part of the purchase price. The Managed Services Note is being repaid through service credits applied against the Managed Services Note under the Managed Services Agreement. As of March 31, 20122013 and 20112012, the outstanding balance of the Managed Services Note was $298$282 and $1,019298, respectively.


6. INVESTMENT IN NON-CONSOLIDATED ENTITY
 
Investment in CDF2 Holdings LLC
 
DuringAs discussed in Note 2, Holdings, a subsidiary of Phase 2 DC, which is wholly owned by the fiscal quarter ended December 31, 2011, the Company, made a $2,000 equity investment in CDF2 Holdings, LLC, which was formed and financed by third party debt and an equipment lease investor, along with both movie theatre exhibitors and digital equipment suppliers, to fund the purchase by and deployment of digital projection systems to movie theatre exhibitors. CDF2 Holdings, LLC (“Holdings”) and its wholly owned subsidiary,limited liability company, Cinedigm Digital Funding 2, LLC, (“Funding” and, together withwere created for the purpose of capitalizing on the conversion of the exhibition industry from film to digital technology. Holdings “CDF2”) have entered into variousassists customers in procuring the necessary equipment in the conversion of their Systems by providing the necessary financing, agreements for commitments of up to approximately $125,000 to purchase and deploy up to 2,300 digital projection systems to movie theatre auditoriums across the United States. CDF2, together with Access Digital Cinema Phase 2, Corp. ("ADCP 2"), a wholly-owned subsidiary of Cinedigm and the direct parent of Holdings, has also entered into contracts with film studio distributors for payment of virtual print fees and alternative content fees for digital content shown on these digital projection systems as well as a management services agreement with the Company for administrative services related to theequipment, installation and management of the contracts related to these digital projection systems and digital deployment agreements over a 10 year period commencing as of October 18, 2011. ADCP 2 has pledged all of the outstanding membership interests ofongoing services. Holdings and Holdings has pledged all of the outstanding membership interests of Funding and has granted a security interest in all of its equipment, inventory and general intangibles, and Funding has pledged all of its assets to Société Générale, New York Branch, as collateral agent, in support of certain of the financing agreements.

While the Company indirectly owns 100% of the common equity of CDF2, which is a VIE, itas defined in ASC 810, indirectly wholly owned by the Company. ASC 810 requires the consolidation of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE. To be a primary beneficiary, an entity must have the power to direct the activities of a VIE that most significantly impact the VIE's economic performance, among other factors. Although Holdings is indirectly wholly owned by the Company, a third party, which also has a variable interest in Holdings, along with an independent third party manager and the Company must mutually approve all business activities and transactions that significantly impact Holdings' economic performance. The Company has thus assessed its variable interests in Holdings and determined that it is not the primary beneficiary of CDF2 in accordance with ASC Topic 810,Holdings and it is accountingtherefore accounts for its investment in CDF2Holdings under the equity method of accounting (see Note 2). accounting. In completing our assessment, the Company identified the activities that it considers most significant to the economic performance of Holdings and determined that we do not have the power to direct those activities. As a result, Holdings' financial position and results of operations are not consolidated in the financial position and results of operations of the Company.

The Company's netmaximum exposure to loss as it relates to Holdings as of March 31, 2013 and 2012 includes:

The investment in CDF2 is reflected as “Investment in non-consolidated entity, net" inthe equity of Holdings of $1,812 and $1,490, respectively; and
Accounts receivable due from Holdings for service fees under its master service agreement of $396 and $668, respectively, included within accounts receivable, net on the accompanying consolidated balance sheets.


During the fiscal years ended March 31, 2013 and 2012, the Company received $1,597 and $458 in aggregate revenues through digital cinema servicing fees from Holdings, respectively, included in revenues on the accompanying consolidated statements of operations.


F-23


The changes in the carrying amount of our investment in CDF2Holdings for the fiscal year ended March 31, 20122013 are as follows:

Balance as of March 31, 2011 $—
Balance at March 31, 2011 $—
Equity contributions 2,000
 2,000
Equity in loss of CDF2 (510)
Equity in loss of Holdings (510)
Balance at March 31, 2012 $1,490
 1,490
Equity in income of Holdings 322
Balance at March 31, 2013 $1,812


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7.NOTES PAYABLE

Notes payable consisted of the following:
 As of March 31, 2012 As of March 31, 2011 As of March 31, 2013 As of March 31, 2012
Notes Payable Current Portion Long Term Portion Current Portion Long Term Portion Current Portion Long Term Portion Current Portion Long Term Portion
2013 Term Loans, net of debt discount $26,250
 $96,207
 $—
 $—
2013 Prospect Loan Agreement —
 70,151
 —
 —
2010 Term Loans, net of debt discount $24,151
 $93,399
 $24,151
 $123,262
 —
 —
 24,151
 93,399
KBC Facilities 11,339
 40,929
 4,191
 39,705
 8,059
 36,205
 11,339
 40,929
P2 Vendor Note 94
 623
 72
 649
 74
 569
 94
 623
P2 Exhibitor Notes 60
 394
 69
 455
 64
 330
 60
 394
Total non-recourse notes payable $35,644
 $135,345
 $28,483
 $164,071
 $34,447
 $203,462
 $35,644
 $135,345
                
2010 Note, net of debt discount $—
 $87,354
 $—
 $78,169
 $—
 $—
 $—
 $87,354
Total recourse notes payable $—
 $87,354
 $—
 $78,169
 $—
 $—
 $—
 $87,354
Total notes payable $35,644
 $222,699
 $28,483
 $242,240
 $34,447
 $203,462
 $35,644
 $222,699

Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse with respect to defaults by the Company is limited to the value of the asset collateralized by the debt.  The Vendor Note and the GE Credit Facility2013 Term Loans are not guaranteed by the Company or its other subsidiaries, other than Phase 1 DC. The 2013 Prospect Loan Agreement is not guaranteed by the Company or its other subsidiaries, other than Phase 1 DC and Phase 2 DC. The KBC Facility,Facilities, the P2 Vendor Note and the P2 Exhibitor Notes are not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC.

In May 2010, CDF I, an indirectly wholly-owned, special purpose, non-recourse subsidiary of the Company, formed in April 2010, entered into a definitive credit agreement (the “2010 Credit Agreement”) with Société Générale, New York Branch (“SocGen”), as co-administrative agent, paying agent for the lenders party thereto and certain other secured parties and subsequently as collateral agent.  Pursuant to the 2010 Credit Agreement, CDF I borrowed term loans (the “2010 Term Loans”) in the principal amount of $172,500.  These 2010 Term Loans were non-recourse to the Company.  Under the 2010 Credit Agreement, each of the 2010 Term Loans bore interest, at the option of CDF I and subject to certain conditions, based on the base rate (generally, the bank prime rate) plus a margin of 2.50% or the Eurodollar rate (subject to a floor of 1.75%), plus a margin of 3.50%.  

On February 28, 2013, CDF I entered into an amended and restated credit agreement (the “2013 Credit Agreement”) with Société Générale, New York Branch, as administrative agent and collateral agent for the lenders party thereto and certain other secured parties (the “Collateral Agent”), and the lenders party thereto. The 2013 Credit Agreement amended and restated the 2010 Credit Agreement. The primary changes effected by the Amended and Restated Credit Agreement were (i) changing the aggregate principal amount of the term loans to $130,000, which included an assignment of $5,000 of the principal balance to an affiliate of CDF I, (ii) changing the interest rate (described further below) and (iii) extending the term of the credit facility to February 2018. The proceeds of the term loans ("2013 Term Loans") under the 2013 Credit Agreement were used by CDF I to refinance the 2010 Credit Agreement.

The Company recognized a loss from debt extinguishment on the 2010 Term Loans of $2,996, principally from the write-off of previously deferred debt issuance costs and original issue discount, during the fiscal year ended March 31, 2013.

Under the 2013 Credit Agreement, each of the 2013 Term loans bears interest, at the option of CDF I and subject to certain conditions, based on the base rate (generally, the bank prime rate) or the LIBOR rate set at a minimum of 1.00%, plus a margin of 1.75% (in the case of base rate loans) or, 2.75% (in the case of LIBOR rate loans). All collections and revenues of CDF I are deposited into designated accounts, from which amounts are paid out on a monthly basis to pay certain operating expenses and principal, interest, fees, costs and expenses relating to the 2013 Credit Agreement according to certain designated priorities. On a quarterly basis, if funds remain after the payment of all such amounts, they will be applied to prepay the 2013 Term Loans. The 2013 Term Loans mature and must be paid in full by February 28, 2018. In addition, CDF I may prepay the 2013 Term Loans, in whole or in part, subject to paying certain breakage costs, if applicable, and a 1.00% prepayment premium if a prepayment is made during the first year of the 2013 Term Loans.

The 2013 Credit Agreement also requires each of CDF I’s existing and future direct and indirect domestic subsidiaries (the "Guarantors") to guarantee, under an Amended and Restated Guaranty and Security Agreement dated as of February 28, 2013 by

F-24


and among CDF I, the Guarantors and the Collateral Agent (the “Guaranty and Security Agreement”), the obligations under the 2013 Credit Agreement, and all such obligations to be secured by a first priority perfected security interest in all of the collective assets of CDF I and the Guarantors, including real estate owned or leased, and all capital stock or other equity interests in C/AIX, the direct holder of CDF I’s equity, CDF I and CDF I’s subsidiaries. In connection with the 2013 Credit Agreement, AccessDM, a wholly-owned subsidiary of the Company and the direct parent of C/AIX, entered into an amended and restated pledge agreement dated as of February 28, 2013 (the “AccessDM Pledge Agreement”) in favor of the Collateral Agent pursuant to which AccessDM pledged to the Collateral Agent all of the outstanding shares of common stock of C/AIX, and C/AIX entered into an amended and restated pledge agreement dated as of February 28, 2013 (the “C/AIX Pledge Agreement”) in favor of the Collateral Agent pursuant to which C/AIX pledged to the Collateral Agent all of the outstanding membership interests of CDF I. The 2013 Credit Agreement contains customary representations, warranties, affirmative covenants, negative covenants and events of default.

All collections and revenues of CDF I are deposited into designated accounts. These amounts are included in cash and cash equivalents in the consolidated balance sheets and are only available to pay certain operating expenses, principal, interest, fees, costs and expenses relating to both the 2013 Credit Agreement and 2010 Credit Agreement, according to certain designated priorities, which totaled $6,787 and $8,447 as of March 31, 2013 and 2012, respectively.  The Company also set up a debt service fund under both the 2013 Credit Agreement and 2010 Credit Agreement for future principal and interest payments, classified as restricted cash of $5,751 as of both March 31, 2013 and 2012.

The Company deferred debt issuance costs of $1,639 associated with the issuance of the 2013 Term Loans. Such costs will be amortized through February 2018.

The balance of the 2010 Term Loans, net of the original issue discount, at March 31, 2013 and March 31, 2012 was as follows:
 As of March 31, 2013 As of March 31, 2012
2010 Term Loans, at issuance$172,500
 $172,500
Payments to date(172,500) (53,777)
Discount on 2010 Term Loans—
 (1,173)
2010 Term Loans, net—
 117,550
Less current portion—
 (24,151)
Total long term portion$—
 $93,399

The balance of the 2013 Term Loans, net of the original issue discount, at March 31, 2013 was as follows:
 As of March 31, 2013
2013 Term Loans, at issuance, net$125,087
Payments to date(2,275)
Discount on 2013 Term Loans(355)
2013 Term Loans, net122,457
Less current portion(26,250)
Total long term portion$96,207

On February 28, 2013, DC Holdings LLC, AccessDM and Phase 2 DC entered into term loan agreement (the “2013 Prospect Loan Agreement”) with Prospect Capital Corporation (“Prospect”), as administrative agent (the “Prospect Administrative Agent”) and collateral agent (the “Prospect Collateral Agent”) for the lenders party thereto, and the other lenders party thereto pursuant to which DC Holdings LLC borrowed $70,000 (the “2013 Prospect Loan”) . The 2013 Prospect Loan will bear interest annually in cash at LIBOR plus 9.00% (with a 2.00% LIBOR floor) and at 2.50% to be accrued as an increase in the aggregate principal amount of the 2013 Prospect Loan until the 2013 Credit Agreement is paid off, at which time all interest will be payable in cash.

The 2013 Prospect Loan matures on March 31, 2021. The 2013 Prospect Loan may be accelerated upon a change in control (as defined in the Term Loan Agreement) or other events of default as set forth therein and would be subject to mandatory acceleration upon an insolvency of DC Holdings LLC. The 2013 Prospect Loan is payable on a voluntary basis after the second anniversary of the initial borrowing in whole but not in part, subject to a prepayment penalty equal to 5.00% of the principal amount prepaid if the 2013 Prospect Loan is prepaid after the second anniversary but prior to the third anniversary of issuance, a prepayment penalty of 4.00% of the principal amount prepaid if the 2013 Prospect Loan is prepaid after such third anniversary but prior to the fourth anniversary of issuance, a prepayment penalty of 3.00% of the principal amount prepaid if the 2013 Prospect Loan is prepaid after such fourth anniversary but prior to the fifth anniversary of issuance, a prepayment penalty of 2.00% of the principal amount

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prepaid if the 2013 Prospect Loan is prepaid after such fifth anniversary but prior to the sixth anniversary of issuance, a prepayment penalty of 1.00% of the principal amount prepaid if the 2013 Prospect Loan is prepaid after such sixth anniversary but prior to the seventh anniversary of issuance, and without penalty if the 2013 Prospect Loan is prepaid thereafter, plus cash in an amount equal to the accrued and unpaid interest amount with respect to the principal amount through and including the prepayment date.

In connection with the 2013 Prospect Loan, the Company assigned to DC Holdings LLC its rights to receive servicing fees under the Company’s Phase I and Phase II deployments. Pursuant to a Limited Recourse Pledge Agreement (the “Limited Recourse Pledge”) executed by the Company and a Guaranty, Pledge and Security Agreement (the “Prospect Guaranty and Security Agreement”) among DC Holdings LLC, AccessDM, Phase 2 DC and Prospect, as Prospect Collateral Agent, the Prospect Loan is secured by, among other things, a first priority pledge of the stock of Holdings owned by the Company, the stock of AccessDM owned by DC Holdings LLC and the stock of Phase 2 DC owned by the Company, and guaranteed by AccessDM and Phase 2 DC. The Company provides limited financial support to the 2013 Prospect Loan not to exceed $1,500 per year in the event financial performance does not meet certain defined benchmarks.

The Company deferred debt issuance costs of $4,214 associated with the issuance of the 2013 Prospect Loan. Such costs will be amortized through March 2021.

The 2013 Prospect Loan Agreement contains customary representations, warranties, affirmative covenants, negative covenants and events of default. The balance of the 2013 Prospect Loan Agreement at March 31, 2013 was as follows:
 As of March 31, 2013
2013 Prospect Loan Agreement, at issuance$70,000
PIK Interest151
2013 Prospect Loan Agreement, net$70,151
Less current portion—
Total long term portion$70,151

In August 2009, the Company entered into a securities purchase agreement (the “Sageview Purchase Agreement”) with an affiliate of Sageview Capital LP (“Sageview” or the “Purchaser”) pursuant to which the Company agreed to issue a Senior Secured Note (the “2009 Note”) in the aggregate principal amount of $75,000$75,000 and warrants (the “Sageview Warrants”) to purchase 16,000,000 shares of its Class A Common Stock (the “2009 Private Placement”).  The 2009 Note was later amended and restated on May 6, 2010 (as so amended and restated, the “2010 Note”).  The 2010 Note was repaid by the Company from the proceeds of the 2013 Term Loans and the 2010 Note was thereby extinguished. The Company recognized a loss from debt extinguishment of the 2010 Note of $4,909, principally from the write-off of previously deferred debt issuance costs and original issue discount, during the fiscal year ended March 31, 2013. The Company additionally paid a debt prepayment fee to Sageview of $3,725 resulting from the repayment of the 2010 Note prior to its maturity date. The balance of the 2010 Note, net of the discount associated with the issuance of the Sageview Warrants and the interest of 8% per annum on the 2010 Note to be accrued as an increase in the aggregate principal amount of the 2010 Note (“PIK Interest”), as of March 31, 2013 and March 31, 2012 was as follows:
 As of March 31,
 2012 2011
2010 Note, at issuance$75,000
 $75,000
Discount on 2010 Note(5,066) (7,213)
PIK Interest17,420
 10,382
2010 Note, net$87,354
 $78,169
Less current portion—
 —
Total long term portion$87,354
 $78,169

In August 2007, Phase 1 DC obtained $9,600 of vendor financing (the “Vendor Note”) for equipment used in Phase 1 DC’s Phase I Deployment. The Vendor Note bears interest at 11% and may be prepaid without penalty.  Interest is due semi-annually commencing February 2008 and is paid by Cinedigm.  The balance of the Vendor Note, together with all unpaid interest, is due on the maturity date of August 1, 2016.  In May 2010, the Vendor Note was repaid in full from the proceeds of the 2010 Term Loans, as discussed below.

In May 2010, CDF I, an indirectly wholly-owned, special purpose, non-recourse subsidiary of the Company, formed in April 2010, entered into a definitive credit agreement (the “2010 Credit Agreement”) with Société Générale, New York Branch

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(“SocGen”), as co-administrative agent and paying agent for the lenders party thereto and certain other secured parties, and General Electric Capital Corporation (“GECC”), as co-administrative agent and collateral agent (the “Collateral Agent”).  Pursuant to the 2010 Credit Agreement, CDF I borrowed term loans (the “2010 Term Loans”) in the principal amount of $172,500.  These 2010 Term Loans are non-recourse to the Company.  The proceeds of the 2010 Term Loans were used by CDF I to pay all costs, fees and expenses relating to the transaction and to pay $157,456 to Phase 1 DC, as part of the consideration for the acquisition by CDF I of all of the assets and liabilities of Phase 1 DC pursuant to a Sale and Contribution Agreement between CDF I and Phase 1 DC.  Phase 1 DC acquired all of the outstanding membership interests in CDF I pursuant to this Sale and Contribution Agreement.  Phase 1 DC, in turn, extinguished all of its outstanding obligations with respect to the GE Credit Facility and the Vendor Note, and its intercompany obligations owed to the Company.   Under the 2010 Credit Agreement, each of the 2010 Term Loans will bear interest, at the option of CDF I and subject to certain conditions, based on the base rate (generally, the bank prime rate) plus a margin of 2.50% or the Eurodollar rate (subject to a floor of 1.75%), plus a margin of 3.50%.  All collections and revenues of CDF I are deposited into special blocked accounts. These amounts are included in cash and cash equivalents in the consolidated balance sheets and are only available to pay certain operating expenses, principal, interest, fees, costs and expenses relating to the 2010 Credit Agreement according to certain designated priorities, which totaled $8,447 and $7,492 as of March 31, 2012 and 2011, respectively.  On a quarterly basis, if funds remain after the payment of all such amounts, they will be applied to prepay the 2010 Term Loans.  After certain conditions are met, CDF I may use up to 50% of the remaining funds to pay dividends or distributions to Phase 1 DC.  The Company also set up a debt service fund under the 2010 Credit Agreement for future principal and interest payments, classified as restricted cash of $5,751 as of March 31, 2012 and 2011.

The 2010 Term Loans mature and must be paid in full by April 29, 2016.  In addition, CDF I may prepay the 2010 Term Loans, without premium or penalty, in whole or in part, subject to paying certain breakage costs, if applicable.  The 2010 Credit Agreement also requires each of CDF I’s existing and future direct and indirect domestic subsidiaries (the "Guarantors") to guarantee, under a Guaranty and Security  Agreement dated as of May 6, 2010 by and among CDF I, the Guarantors and the Collateral Agent (the “Guaranty and Security Agreement”), the obligations under the 2010 Credit Agreement, and all such obligations to be secured by a first priority perfected security interest in all of the collective assets of CDF I and the Guarantors, including real estate owned or leased, and all capital stock or other equity interests in Phase 1 DC, CDF I and CDF I’s subsidiaries.  In connection with the 2010 Credit Agreement, AccessDM, the direct parent of Phase 1 DC, entered into a pledge agreement dated as of May 6, 2010 in favor of the Collateral Agent (the “ADM Pledge Agreement”) pursuant to which AccessDM pledged to the Collateral Agent all of the outstanding shares of common stock of Phase 1 DC, and Phase 1 DC entered into a pledge agreement dated as of May 6, 2010 in favor of the Collateral Agent (the “Phase 1 DC Pledge Agreement”) pursuant to which Phase 1 DC pledged to the Collateral Agent all of the outstanding membership interests of CDF I.  The 2010 Credit Agreement contains customary representations, warranties, affirmative covenants, negative covenants and events of default, as well as conditions to borrowings.  The balance of the 2010 Term Loans, net of the original issue discount, was as follows:
 As of March 31, 2012 As of March 31, 2011
2010 Term Loans, at issuance$172,500
 $172,500
Payments to date(53,777) (23,626)
Discount on 2010 Term Loans(1,173) (1,461)
2010 Term Loans, net117,550
 147,413
Less current portion(24,151) (24,151)
Total long term portion$93,399
 $123,262

In June 2010, CDF I executed the three separate Interest Rate Swaps with counterparties for a total notional amount of approximately 66.67% of the amounts to be outstanding at June 15, 2011 under the 2010 Term Loans or an initial amount of $100,000. Under the Interest Rate Swaps, CDF I will effectively pay a fixed rate of 2.16%, to guard against CDF I’s exposure to increases in the variable interest rate under the 2010 Term Loans. SocGen arranged the transaction, which took effect commencing June 15, 2011  as required by the 2010 Term Loans and will remain in effect until at least June 15, 2013.  As principal repayments of the 2010 Term Loans occur, the notional amount will decrease by a pro rata amount, such that approximately $80,000 of the remaining principal amount will be covered by the Interest Rate Swaps at any time. The Company has not sought hedge accounting and therefore, changes in the value of its Interest Rate Swaps will be recorded in the consolidated statements of operations (see Note 2).
 As of March 31, 2013 As of March 31, 2012
2010 Note, at issuance$75,000
 $75,000
Discount on 2010 Note—
 (5,066)
PIK Interest24,341
 17,420
Payments to date(99,341)  
2010 Note, net$—
 $87,354
Less current portion—
 —
Total long term portion$—
 $87,354

CREDIT FACILITIES

In August 2006, Phase 1 DC entered into an agreement with GECC pursuant to which GECC and certain other lenders agreed to provide to Phase 1 DC a $217,000 Senior Secured Multi Draw Term Loan (the “GE Credit Facility”). Proceeds from the GE

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Credit Facility were used for the purchase and installation of up to 70% of the aggregate purchase price, including all costs, fees or other expenses associated with the purchase acquisition, receipt, delivery, construction and installation of Systems in connection with Phase 1 DC’s Phase I Deployment and to pay transaction fees and expenses related to the GE Credit Facility, and for certain other specified purposes. The GE Credit Facility was not guaranteed by the Company or its other subsidiaries, other than Phase 1 DC. In May 2010, the GE Credit Facility was extinguished. The write-off of unamortized debt issuance costs of $3,320 and a prepayment penalty of $1,128 resulted in a $4,448 loss on extinguishment of note payable in the consolidated statements of operations.

In April 2008, Phase 1 DC executed an Interest Rate Swap, otherwise known as an “arranged hedge transaction” or "synthetic fixed rate financing" with a counterparty for a notional amount of approximately 90% of the amounts outstanding under the GE Credit Facility or an initial amount of $180,000. Under the Interest Rate Swap, Phase 1 DC will effectively pay a fixed rate of 7.3%, to guard against Phase 1 DC’s exposure to increases in the variable interest rate under the GE Credit Facility. GE Corporate Financial Services arranged the transaction, which took effect commencing August 1, 2008 as required by the GE Credit Facility and will remain in effect until August 2010.  As principal repayments of the GE Credit Facility occur, the notional amount will decrease by a pro rata amount, such that approximately 90% of the remaining principal amount will be covered by the Interest Rate Swap at any time.   In May 2010, the Interest Rate Swap was settled in cash with the counter party for $888 from the proceeds of the 2010 Term Loans discussed above.
In December 2008, Phase 2 B/AIX, a direct wholly-owned subsidiary of Phase 2 DC and an indirect wholly-owned subsidiary of the Company, enteredbegan entering into amultiple credit facility of up to a maximum of $8,900 with KBC Bank NV (the “KBC Facility #1”)facilities to fund the purchase of Systems from Barco, Inc. (“Barco”), to be installed in movie theatres as part of the Company’s Phase II Deployment. The KBC Facility #1 required interest-only payments at 7.3% per annum through December 31, 2009.  TheA summary of the credit facilities is as follows:


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        Outstanding Principal Balance Draw as of
Facility1
 Credit Facility 
Interest Rate1
 Maturity Date As of March 31, 2013 As of March 31, 2012 March 31, 2013
1
 $8,900
 8.5% December 2016 $—
 $3,059
 $—
2
 2,890
 3.75% December 2017 1,961
 2,347
 27
3
 22,336
 3.75% September 2018 16,752
 20,221
 662
4
 13,312
 3.75% September 2018 10,459
 12,361
 —
5
 11,425
 3.75% March 2019 9,794
 11,425
 —
6
 6,450
 3.75% December 2018 5,298
 2,855
 3,429
  $65,313
     $44,264
 $52,268
 $4,118
1 For each facility, principal is to be repaid in twenty-eight equal quarterly installments commencing in March 2010 and ending December 31, 2016 (the “Repayment Period”) at aninstallments.
2 The interest rate of 8.5% per annum during the Repayment Period.  The KBC Facility #1 may be prepaid at any time without penalty and is not guaranteed by the Company or its other subsidiaries, other than Phasefor facilities 2 DC.  During the fiscal year ended March 31, 2012, there was no amount drawn down on the KBC Facility #1. As of March 31, 2012 and 2011, the outstanding principal balance of the KBC Facility #1 was $3,059 and $7,298, respectively.

In February 2010, Phase 2 B/AIX entered into an additional credit facility with KBC Bank NV (the “KBC Facility #2”) to fund the purchase of Systems from Barco, to be installed in movie theatres as part of the Company’s Phase II Deployment.  The KBC Facility #2 provides for borrowings of up to a maximum of $2,890 through December 31, 2010 (the “Draw Down Period”) and requires interest-only payments based on the three month London Interbank Offered Rate ("LIBOR") plus 3.75% per annum during the Draw Down Period.  For any funds drawn, the principal is to be repaid in twenty-eight equal quarterly installments commencing in March 2011 and ending December 2017 (the “Repayment Period”) at an interest rate based on6 are the three month LIBOR, plus 3.75% per annum during the Repayment Period.  The KBC Facility #2 may be prepaid at any time without penalty and is not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC. During the fiscal year ended March 31, 2012, $1,285 has been drawn down on the KBC Facility #2. As of March 31, 2012 and 2011, the outstanding principal balance of the KBC Facility #2 was $2,347 and $1,475, respectively.

In May 2010, Phase 2 B/AIX entered into an additional credit facility with KBC Bank NV (the “KBC Facility #3”) to fund the purchase of Systems from Barco, to be installed in movie theatres as part of the Company’s Phase II Deployment.  The KBC Facility #3 provides for borrowings of up to a maximum of $22,336 through December 31, 2010 (the “Draw Down Period”) and requires interest-only payments based on the three month LIBOR plus 3.75% per annum during the Draw Down Period.  For any funds drawn, the principal is to be repaid in twenty-eight equal quarterly installments commencing in December 2011 and ending September 2018 (the “Repayment Period”) at an interest rate based on the three month LIBOR plus 3.75% per annum during the Repayment Period.  The KBC Facility #3 may be prepaid at any time without penalty and is not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC.  During the fiscal year ended March 31, 2012, there was no amount drawn down on the KBC Facility #3. As of March 31, 2012 and 2011, the outstanding principal balance of the KBC Facility #3 was $20,221 and $21,811, respectively.

In May 2010, Phase 2 B/AIX entered into an additional credit facility with KBC Bank NV (the “KBC Facility #4”) to fund the purchase of Systems from Barco, to be installed in movie theatres as part of the Company’s Phase II Deployment.  The KBC Facility #4 provides for borrowings of up to a maximum of $13,312 through December 31, 2010 (the “Draw Down Period”) and requires interest-only payments based on the three month LIBOR plus 3.75% per annum during the Draw Down Period.  For any funds drawn, the principal is to be repaid in twenty-eight equal quarterly installments commencing in December 2011 and ending September 2018 (the “Repayment Period”) at an interest rate based on the three month LIBOR plus 3.75% per annum during the Repayment Period.  The KBC Facility #4 may be prepaid at any time without penalty and is not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC.  During the fiscal year ended March 31, 2012, there was no amount drawn down on the KBC Facility #4. As of March 31, 2012 and 2011, the outstanding principal balance

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of the KBC Facility #4 was $12,361 and $13,312, respectively.

In May 2011, Phase 2 B/AIX entered into an additional credit facility with KBC Bank NV (the “KBC Facility #5”) to fund the purchase of Systems from Barco, to be installed in movie theatres as part of the Company’s Phase II Deployment. The KBC Facility #5 provides for borrowings of up to a maximum of $11,425 through March 31, 2012 (the “Draw Down Period”) and requires interest-only payments based on the three month LIBOR plus 3.75% per annum during the Draw Down Period. For any funds drawn, the principal is to be repaid in twenty-eight equal quarterly installments commencing in June 2012 and ending March 2019 (the “Repayment Period”) at an interest rate based on the three month LIBOR plus 3.75% per annum during the Repayment Period. The KBC Facility #5 may be prepaid at any time without penalty and is not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC. As of and for the fiscal year ending March 31, 2012, the outstanding principal balance and total draw down amount was $11,425.

In June 2011, Phase 2 B/AIX entered into an additional credit facility with KBC Bank NV (the “KBC Facility #6”) to fund the purchase of Systems from Barco, to be installed in movie theatres as part of the Company’s Phase II Deployment. The KBC Facility #6 provides for borrowings of up to a maximum of $6,450 through December 31, 2011 (the “Draw Down Period”) and requires interest-only payments based on the three month LIBOR plus 3.75% per annum during the Draw Down Period. For any funds drawn, the principal is to be repaid in twenty-eight equal quarterly installments commencing in March 2012 and ending December 2018 (the “Repayment Period”) at an interest rate based on the three month LIBOR plus 3.75% per annum during the Repayment Period. The KBC Facility #6 may be prepaid at any time without penalty and is not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC. During the fiscal year ended March 31, 2012, $3,084 has been drawn down on the KBC Facility #6 and the outstanding principal balance was $2,855.noted above.

At March 31, 20122013, the Company was in compliance with all of its debt covenants.

The aggregate principal repayments on the Company’s notes payable, excluding debt discounts, are scheduled to be as follows:
For the fiscal years ending March 31,  For the fiscal years ending March 31,
2013 $35,644
2014 33,237
 $34,447
2015 146,407
 33,956
2016 36,697
 33,397
2017 19,732
 29,465
2018 32,740
Thereafter 11,891
 90,022
 $283,608
 $254,027

The amount for fiscal 2015 includes $36,446 of PIK Interest on the 2010 Note, of which $19,206 is to be accrued as additional principal from April 2012 through August 2014.


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8.STOCKHOLDERS’ EQUITY

STOCKHOLDERS’ RIGHTS

On August 10, 2009, the Company entered into a tax benefit preservation plan (the "Tax Preservation Plan"), dated August 10, 2009, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent.  The Company’s board of directors (the "Board") adopted the Tax Preservation Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on its ability to use net operating loss carryforwards (the "NOLs") to reduce potential future federal income tax obligations.  

On August 10, 2009, the Board declared a dividend of one preferred share purchase right (the "Rights") for each outstanding share of the Company’s Class A Common Stock and each outstanding share of the Company’s Class B Common Stock, (the "Class B Common Stock," and together with the Class A Common Stock, the "Common Stock") under the terms of the Tax Preservation Plan.  The dividend is payable to the stockholders of record as of the close of business on August 10, 2009.  Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of the Company’s Series B Junior Participating Preferred Stock, par value $0.001 per share, (the "Preferred B Stock") at a price of $6.00, subject to adjustment.  The Rights are not exercisable, and would only become exercisable when any person or group has acquired, subject to certain conditions, beneficial ownership of 4.99% or more of the Company’s outstanding shares of Class A Common Stock.  Through March 31, 2012, the Company had not record the dividends as no unpermitted 4.99% or more change in the beneficial ownership of the Company’s outstanding shares of Class A Common Stock had occurred.

CAPITAL STOCK

COMMON STOCK

In July 2011,September 2012, the Company entered into a common stock purchase agreement (the “Purchase Agreement”) with certain investors party thereto (the “Investors”) pursuant to whichincreased the Company sold to the Investors an aggregatenumber of 4,338,750 shares of Class A Common Stock authorized for an aggregate purchase price in cashissuance by 30,000,000 shares and redesignated the 13,759,000 unissued shares of $6,942, or $1.60 per share. The proceeds are being used for general working capital purposes and strategic opportunities. The Company also entered into a Registration Rights Agreement with the Investors (the “Registration Rights Agreement“) pursuant to which the Company agreed to register the resale of these shares from time to time in accordance with the terms of the Registration Rights Agreement. The Company filed a registration statement for the resale of these shares on August 3, 2011 and it was declared effective by the SEC on August 16, 2011.

During the fiscal year ended March 31, 2012, the Company issued 50,000Class B Common Stock as shares of Class A Common Stock, with an aggregate valueresulting in a total of $86, to independent third parties for strategic management services related to CEG. In addition to the 50,000118,759,000 authorized shares of Class A Common Stock and 1,241,000 shares of authorized Class B Common Stock of which none remain available for issuance.

On April 26, 2012, the holder of 25,000 shares of the Company's Class B common stock converted all of the Class B shares into 25,000 Class A common stock shares. Accordingly the Company no longer has any Class B common stock outstanding.

In April 2012, the Company issued its strategic management service provider warrants with an exercise7,857,143 shares of Class A common stock at a public offering price of $1.72$1.40 per share, resulting in net proceeds to purchase up to 525,000 sharesthe Company of its Class A Common Stock that vest over 15 months. $10,000, net of costs of $1,121.

PREFERRED STOCK

Cumulative dividends in arrears on the Preferred Stockpreferred stock at March 31, 20122013 and 20112012 was $67were $90 and $13967, respectively.

CINEDIGM’S EQUITY INCENTIVE PLAN

At March 31, 2012, theThe Company’s equity incentive plan (“the Plan”) previously provided for the issuance of up to 7,000,0006,300,000 shares of Class A Common Stock to employees, outside directors and consultants. On April 20,At the Annual Meeting of Stockholders on September 12, 2012 of the Company, the stockholders of the Company approved an amendment to the Plan to increase the total number of shares authorizedof the Company's Class A Common Stock available for issuance under the Plan was reduced to 6,300,000.9,300,000 shares.


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Stock Options

Awards under the Plan may be in any of the following forms (or a combination thereof) (i) stock option awards; (ii) stock appreciation rights; (iii) stock or restricted stock or restricted stock units; or (iv) performance awards. The Plan provides for the granting of incentive stock options (“ISOs”) with exercise prices not less than the fair market value of the Company’s Class A Common Stock on the date of grant. ISOs granted to shareholders of more than 10% of the total combined voting power of the Company must have exercise prices of at least 110% of the fair market value of the Company’s Class A Common Stock on the date of grant. ISOs and non-statutory stock options granted under the Plan are subject to vesting provisions, and exercise is subject to the continuous service of the participant. The exercise prices and vesting periods (if any) for non-statutory options are set at the discretion of the Company’s Board.compensation committee. Upon a change of control of the Company, all stock options (incentive and

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non-statutory) that have not previously vested will vest immediately and become fully exercisable. In connection with the grants of stock options under the Plan, the Company and the participants have executed stock option agreements setting forth the terms of the grants.

During the fiscal year ended March 31, 20122013, under the Plan, the Company granted stock options to purchase 2,155,500972,000 shares of its Class A Common Stock to its employees at exercise prices ranging from $1.15$1.37 to $3.00$1.72 per share, which will vest equally over a threefour year period.  As of March 31, 20122013, the weighted average exercise price for outstanding stock options is $2.272.16 and the weighted average remaining contractual life is 7.56.91 years.
 
The following table summarizes the activity of the Plan related to shares issuable pursuant to outstanding options:
Shares Under Option Weighted Average Exercise Price Per ShareShares Under Option 
Weighted Average Exercise Price
Per Share
Balance at March 31, 20103,910,372
 $4.11
Granted257,964
 1.45
Exercised—
 —
Cancelled(1,553,349) 5.34
Balance at March 31, 20112,614,987
 3.12
2,614,987
 $3.12
Granted2,155,500
 1.77
2,155,500
 1.77
Exercised(93,628) 1.37
(93,628) 1.37
Cancelled(986,069) 3.50
Canceled(986,069) 3.50
Balance at March 31, 20123,690,790
 2.27
3,690,790
 2.27
Granted972,000
 1.60
Exercised—
 —
Canceled(609,790) 1.91
Balance at March 31, 20134,053,000
 2.16

An analysis of all options outstanding under the Plan as of March 31, 20122013 is presented below:
Range of Prices Options Outstanding 
Weighted
Average
Remaining
Life in Years
 
Weighted
Average
Exercise
Price
 Aggregate Intrinsic Value
$0.63 - $1.15 5,000
 9.52 $1.15
 $2,700
$1.36 - $2.19 2,891,540
 7.97 1.47
 673,529
$2.23 - $3.60 397,250
 8.24 2.98
 —
$4.81 - $7.55 284,500
 3.53 5.82
 —
$7.60 - $13.52 112,500
 4.10 11.33
 —
  3,690,790
 7.54 2.27
 $676,229
Range of Prices Options Outstanding 
Weighted
Average
Remaining
Life in Years
 
Weighted
Average
Exercise
Price
 Aggregate Intrinsic Value
$0.01 - $1.37 1,130,845
 4.8
 $1.37
 $216,161
$1.38 - $1.75 2,039,845
 8.7
 1.49
 155,392
$1.76 - $2.25 122,660
 7.5
 1.99
 —
$2.26 - $3.00 352,650
 8.6
 3.00
 —
$3.01 - $5.00 139,500
 1.1
 4.59
 —
$5.01 - $15.00 267,500
 3.0
 8.30
 —
  4,053,000
     $371,553

An analysis of all options exercisable under the Plan as of March 31, 20122013 is presented below:
Options
Exercisable
Options
Exercisable
 
Weighted
Average
Remaining
Life in Years
 
Weighted
Average
Exercise
Price
 Aggregate Intrinsic Value
Options
Exercisable
 
Weighted
Average
Remaining
Life in Years
 
Weighted
Average
Exercise
Price
 Aggregate Intrinsic Value
1,035,862
 4.01
 $3.80
 $164,098
1,982,564
 4.94
 $2.63
 $227,816

As of March 31, 2012, unamortized stock-based compensation relating to options outstanding totaled $1,700, which will be expensed over the next 3.1 years.

In December 2010, the Company issued the new CEO options to purchase 4,500,000 shares of Class A Common Stock, 1,500,000 of which carry an exercise price of $1.50, 2,500,000 of which carry an exercise price of $3.00, and 500,000 of which carry an exercise price of $5.00. One-third of the options in each tranche began vesting in December 2011 and will finish in December 2013 and all of the options have a term of ten (10) years. These options were issued outside of the Plan as an inducement to entering into employment with the Company. For the fiscal years ended March 31, 2012 and 2011, the Company recorded $1,213 and $315 of stock-based compensation expense relating to these options, respectively.

F-29F-28


Restricted Stock Awards

The Plan also provides for the issuance of restricted stock and restricted stock unit awards.  During the fiscal year ended March 31, 20122013, the Company did not grant any restricted stock or restricted stock units.

The following table summarizes the activity of the Plan related to restricted stock awards:
 Restricted Stock Awards Weighted Average Market Price Per Share
Balance at March 31, 20101,065,674
 $1.83
Granted153,843
 1.40
Vested(399,898) 0.94
Cancelled(89,035) 1.44
Balance at March 31, 2011730,584
 1.40
Granted—
 —
Vested(453,968) 1.54
Cancelled(119,418) 1.17
Balance at March 31, 2012157,198
 1.18

There were 157,198 restricted stock units granted which have not vested as of March 31, 2012.  The Company may pay such restricted stock units upon vesting in cash or shares of Class A Common Stock or a combination thereof at the Company’s discretion.

For the fiscal years ended March 31, 2012 and 2011, the Company recorded $120 and $559, respectively, of stock-based compensation expense from continuing operations relating to restricted stock awards.  As of March 31, 2012, unamortized stock-based compensation relating to restricted stock awards outstanding totaled $61, which will be expensed over the next 1.0 years.
 Restricted Stock Awards Weighted Average Market Price Per Share
Balance at March 31, 2011730,584
 $1.40
Granted—
 —
Vested(453,968) 1.54
Cancelled(119,418) 1.17
Balance at March 31, 2012157,198
 1.18
Granted—
 —
Vested(122,601) 1.12
Cancelled(18,489) 1.37
Balance at March 31, 201316,108
 1.40

WARRANTS

At March 31, 20122013, outstanding warrants consisted of 16,000,000 held by Sageview ("Sageview Warrants") and 525,000 held by a strategic management service provider.

The Sageview Warrants were exercisable beginning on September 30, 2009, contain a customary cashless exercise provision and anti-dilution adjustments, and expire on August 11, 2016 (subject to extension in limited circumstances). The Company also entered into a Registration Rights Agreement with Sageview pursuant to which the Company agreed to register the resale of the Sageview Warrants and the underlying shares of the Sageview Warrants from time to time in accordance with the terms of such Registration Rights Agreement. Based on the terms of the warrant and the Registration Rights Agreement, the Company determined that the fair value of the Sageview Warrant represents a liability until such time when the underlying common shares are registered. The shares underlying the Sageview Warrant were registered with the SEC for resale in September 2010 and the Company reclassified the warrant liability of $16,054 to stockholders' equity.

The strategic management service provider warrants were issued in connection with a consulting management services agreement entered into with the Company. These warrants for the purchase of 525,000 shares of Class A common stock vestvested over 18 months commencing in July 2011, and are subject to termination with 90 days notice in the event of termination of the consulting management services agreement.agreement and expire on July 1, 2021.

9.COMMITMENTS AND CONTINGENCIES

As of March 31, 2012, in connection withThe Company is subject to a capital lease obligation where we have no continuing involvement other than being the Phase II Deployment, Phase 2 DC has entered into digital cinema deployment agreements with various motion picture studios forprimary obligor. A sub-lease agreement, through which an unrelated third party purchaser pays the distribution of digital movie releases to motion picture exhibitors equipped with Systems, and providing for payment of VPFs to Phase 2 DC. 

In November 2008, in connection with the Phase II Deployment, Phase 2 DC entered into a supply agreement with Christie, for

F-30


the purchase of up to 10,000 Systems at agreed upon pricing, as partcapital lease, was amended during January 2013. The impact of the Phase II Deployment.  As of March 31, 2012,capital lease amendment to the Company has purchased Systems under this agreement for $898 and has no purchase obligations for additional Systems.

In November 2008, in connection with the Phase II Deployment, Phase 2 DC entered into a supply agreement with Barco, for the purchase of up to 5,000 Systems at agreed upon pricing, as part of the Phase II Deployment.  As of March 31, 2012, the Company has purchased Systems under this agreement for an accumulated total of $59,927 and has additional purchase obligations for approximately $2,148.Company's consolidated financial statements was not material.

LITIGATION

We are subject to certain legal proceedings in the ordinary course of business. We do not expect any such items to have a significant impact on our financial position and results of operations and liquidity.

LEASES

As of March 31, 20122013, the Company has outstanding capital lease obligations from continuing operations of $5,4304,518. In May 2011, the Company completed the sale of certain assets and liabilities of the Pavilion Theatre and from that point forward, will not be operated by the Company. The Company has remained the primary obligor on the Pavilion capital lease and entered into a separate sublease agreement with the third party to sublet the Pavilion Theatre.

The Company’s outstandingDuring the fiscal year ended March 31, 2013, the Company reduced its capital lease obligations areobligation resulting from an amended sub-lease agreement in January 2013, through which an unrelated third party purchaser pays the following principal amounts:capital lease and the Company is the primary obligor.



F-29
    As of March 31,
Entity Purpose of capital lease 2012 2011
Corporate Pavilion Theatre $5,430
 $—
Phase 2 DC Computer equipment —
 13
    $5,430
 $13


As of March 31, 20122013, minimum future capital lease payments (including interest) totaled $11,884$9,681, are due as follows:
For the fiscal years ending March 31,
2013$1,132
20141,152
$921
20151,152
921
20161,152
921
20171,152
921
20181,003
Thereafter6,144
4,994
11,884
9,681
Less: amount representing interest(6,454)(5,163)
Outstanding capital lease obligation$5,430
$4,518

The corresponding asset included in property and equipment, net for the Pavilion Theatre was $3,561$2,635 as of March 31, 2012.2013.

Amortization expense on assets under capitalized lease agreements was $342239 and $12342 for the fiscal years ended March 31, 20122013 and 20112012 respectively.


F-31


The Company’s businesses operate from leased properties under non-cancelable operating lease agreements.  As of March 31, 20122013, obligations under non-cancelable operating leases totaled $5,2423,167 and are due as follows:

For the fiscal years ending March 31,
2013$1,255
20141,253
$1,235
20151,269
1,123
20161,142
809
2017323
$5,242
$3,167

Total rent expense was $704$1,217 and $557$704 for the fiscal years ended March 31, 20122013 and 20112012, respectively.  

10.SUPPLEMENTAL CASH FLOW DISCLOSURE
 As of March 31,
 2012 2011
Cash interest paid$20,188
 $24,338
Assets acquired under capital leases$—
 $27
Accretion of preferred stock discount$107
 $108
Accrued dividends on preferred stock$(356) $(394)
Issuance of Class A Common Stock as payment of dividends on preferred stock$—
 $655
Issuance of Class A Common Stock and warrants for professional services of third parties$586
 $104
Cashless exercise of Preferred Warrants$—
 $441
Issuance of Class A Common Stock to Board of Directors for services$426
 $390
Issuance of Class A Common Stock as bonus$357
 $113
 For the Fiscal Year Ended March 31,
 2013 2012
Cash interest paid$18,368
 $20,188
Accretion of preferred stock discount$109
 $107
Accrued dividends on preferred stock$356
 $356
Issuance of Class A Common Stock in connection with New Video acquisition$3,432
 $—
Issuance of Class A Common Stock and warrants for professional services of third parties$—
 $586


F-32F-30


11.SEGMENT INFORMATION

The Company is now comprised of four reportable segments: Phase I Deployment, Phase II Deployment, Services and Content & Entertainment. Our former Other segment has been reclassified as discontinued operations (see Note 1 and Note 3). The segments were determined based on the products and services provided by each segment and how management reviews and makes decisions regarding segment operations. Performance of the segments is evaluated on the segment’s income (loss) from continuing operations before interest, taxes, depreciation and amortization.  As a result of the change in the Company’s reportable segments during the year ended March 31, 2012, the Company has restated the segment information for the prior periods.  All segment information has been restated to reflect the changes described above for all periods presented.
 
The Phase I Deployment and Phase II Deployment segments consist of the following:
Operations of:Products and services provided:
Phase 1 DCFinancing vehicles and administrators for the Company’s 3,724 Systems installed nationwide in Phase 1 DC’s deployment to theatrical exhibitors.  The Company retains ownership of the Systems and the residual cash flows related to the Systems after the repayment of all non-recourse debt and the Company retains at the expiration of exhibitor master license agreements.
Phase 2 DCFinancing vehicles and administrators for the Company’s 7,980 Systems installed in the second digital cinema deployment, through Phase 2 DC.  The Company retains no ownership of the residual cash flows and digital cinema equipment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

The Services segment consists of the following:
Operations of:Products and services provided:
ServicesProvides monitoring, billing, collection, verification and other management services to the Company’s Phase I Deployment, Phase II Deployment, Holdings, as well as to exhibitors who purchase their own equipment. Collects and disburses VPFs from motion picture studios and distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors.
SoftwareDevelops and licenses software to the theatrical distribution and exhibition industries as well as other content owners, provides ASP Service,services, and provides software enhancements and consulting services.

The Content & Entertainment segment consists of the following:
Operations of:Products and services provided:
CEGAcquires, distributes
As a leading distributor of independent digital content, CEG collaborates with producers and provides the marketing for programs of alternativeexhibition community to market, source, curate and distribute independent content to targeted and feature films to movie exhibitors.profitable audiences in theatres and homes, and via mobile and emerging platforms.


One customer represented 11% of consolidated revenues of the Company for the fiscal year ended March 31, 2013.


F-33F-31


Information related to the segments of the Company and its subsidiaries is detailed below:

 As of March 31, 2012 As of March 31, 2013
 Phase I Phase II Services Content & Entertainment Corporate Consolidated Phase I Phase II Services Content & Entertainment Corporate Consolidated
Total intangible assets, net $390
 $13
 $46
 $17
 $—
 $466
 $344
 $6
 $49
 $12,449
 $—
 $12,848
Total goodwill $—
 $—
 $4,197
 $1,568
 $—
 $5,765
 $—
 $—
 $4,197
 $8,542
 $—
 $12,739
Assets from continuing operations $166,020
 $84,394
 $15,364
 $2,284
 $21,861
 $289,923
Assets held for sale           214
Total assets           $290,137
 $137,880
 $79,139
 $21,864
 $39,158
 $6,017
 $284,058
                        
Notes payable, non-recourse $117,550
 $53,439
 $—
 $—
 $—
 $170,989
 $192,609
 $45,300
 $—
 $—
 

 $237,909
Notes payable —
 —
 —
 —
 87,354
 87,354
Capital leases —
 —
 —
 —
 5,430
 5,430
 —
 —
 —
 —
 4,518
 4,518
Total debt $117,550
 $53,439
 $—
 $—
 $92,784
 $263,773
 $192,609
 $45,300
 $—
 $—
 $4,518
 $242,427

 As of March 31, 2011 As of March 31, 2012
 Phase I Phase II Services Content & Entertainment Corporate Consolidated Phase I Phase II Services Content & Entertainment Corporate Consolidated
Total intangible assets, net $434
 $—
 $38
 $224
 $1
 $697
 $390
 $13
 $46
 $17
 $—
 $466
Total goodwill $—
 $—
 $4,197
 $1,568
 $—
 $5,765
 $—
 $—
 $4,197
 $1,568
 $—
 $5,765
Assets from continuing operations $193,318
 $59,704
 $12,896
 $2,699
 $13,701
 $282,318
 $166,020
 $84,394
 $15,364
 $2,284
 $21,861
 $289,923
Assets held for sale           25,170
           214
Total assets           $307,488
           $290,137
                        
Notes payable, non-recourse $147,413
 $45,141
 $—
 $—
 $—
 $192,554
 $117,550
 $53,439
 $—
 $—
 $—
 $170,989
Notes payable —
 —
 —
 —
 78,169
 78,169
 —
 —
 —
 —
 87,354
 87,354
Capital leases —
 —
 —
 —
 13
 13
 —
 —
 —
 —
 5,430
 5,430
Total debt $147,413
 $45,141
 $—
 $—
 $78,182
 $270,736
 $117,550
 $53,439
 $—
 $—
 $92,784
 $263,773

  Capital Expenditures
  For the Fiscal Years Ended March 31,
  Phase I Phase II Services Content & Entertainment 
Corporate1
 Consolidated
2012 $—
 $16,000
 $218
 $40
 $137
 $16,395
2011 $—
 $42,411
 $758
 $136
 $1
 $43,306
(1) All capital expenditures during the fiscal year ended March 31, 2012 pertained to discontinued operations.

F-34F-32


  Statements of Operations
  For the Three Months Ended March 31, 2013
  (Unaudited)
  Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues from external customers $9,871
 $3,151
 $4,281
 $4,052
 $—
 $21,355
Intersegment revenues (1) —
 —
 278
 8
 —
 286
Total segment revenues 9,871
 3,151
 4,559
 4,060
 —
 21,641
Less: Intersegment revenues —
 —
 (278) (8) —
 (286)
Total consolidated revenues $9,871
 $3,151
 $4,281
 $4,052
 $—
 $21,355
Direct operating (exclusive of depreciation and amortization shown below) (2) 112
 174
 1,152
 2,519
 —
 3,957
Selling, general and administrative 3
 52
 1,034
 2,114
 1,456
 4,659
Plus: Allocation of Corporate overhead —
 —
 1,283
 668
 (1,951) —
Research and development —
 —
 32
 

 —
 32
Provision for doubtful accounts 62
 13
 18
 65
 106
 264
Depreciation and amortization of property and equipment 7,137
 1,893
 34
 55
 7
 9,126
Amortization of intangible assets 12
 2
 7
 423
 1
 445
Total operating expenses 7,326
 2,134
 3,560
 5,844
 (381) 18,483
Income (loss) from operations $2,545
 $1,017
 $721
 $(1,792) $381
 $2,872

(1) Intersegment revenues of the Services segment principally represent service fees earned from the Phase I and Phase II Deployments.
(2) Included in direct operating of the Services segment is $336 for the amortization of capitalized software development costs.

The following employee and director stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:
  Statements of Operations
  For the Three Months Ended March 31, 2012
  (Unaudited)
  Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues from external customers $10,702
 $3,458
 $3,391
 $144
 $—
 $17,695
Intersegment revenues (1) 7
 —
 1,652
 1
 —
 1,660
Total segment revenues 10,709
 3,458
 5,043
 145
 —
 19,355
Less: Intersegment revenues (7) —
 (1,652) (1) —
 (1,660)
Total consolidated revenues $10,702
 $3,458
 $3,391
 $144
 $—
 $17,695
Direct operating (exclusive of depreciation and amortization shown below) (2) 79
 109
 1,217
 243
 —
 1,648
Selling, general and administrative 22
 68
 1,014
 401
 2,428
 3,933
Plus: Allocation of Corporate overhead —
 —
 1,090
 (59) (1,031) —
Research and development —
 —
 13
 —
 —
 13
Provision for doubtful accounts 56
 28
 —
 —
 375
 459
Restructuring and transition expenses —
 —
 —
 —
 375
 375
Merger and acquisition expenses —
 —
 —
 —
 604
 604
Depreciation and amortization of property and equipment 7,137
 1,864
 37
 4
 104
 9,146
Amortization of intangible assets 12
 1
 4
 23
 1
 41
Total operating expenses 7,306
 2,070
 3,375
 612
 2,856
 16,219
Income (loss) from operations $3,396
 $1,388
 $16
 $(468) $(2,856) $1,476
  Phase I Phase II Services Content & Entertainment Corporate Consolidated
Direct operating $—
 $—
 $14
 $2
 $—
 $16
Selling, general and administrative —
 —
 25
 21
 358
 404
Research and development —
 —
 32
 —
 —
 32
Total stock-based compensation $—
 $—
 $71
 $23
 $358
 $452



F-33


  Statements of Operations
  For the Three Months Ended March 31, 2012
  (Unaudited)
  Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues from external customers $10,176
 $3,156
 $4,219
 $144
 $—
 $17,695
Intersegment revenues (1) —
 —
 824
 1
 —
 825
Total segment revenues 10,176
 3,156
 5,043
 145
 —
 18,520
Less: Intersegment revenues —
 —
 (824) (1) —
 (825)
Total consolidated revenues $10,176
 $3,156
 $4,219
 $144
 $—
 $17,695
Direct operating (exclusive of depreciation and amortization shown below) (2) 79
 109
 1,217
 243
 —
 1,648
Selling, general and administrative 22
 68
 1,014
 401
 2,428
 3,933
Plus: Allocation of Corporate overhead —
 —
 1,090
 (59) (1,031) —
Research and development —
 —
 13
 —
 —
 13
Provision for doubtful accounts 56
 28
 —
 —
 375
 459
Restructuring and transition expenses —
 —
 —
 —
 375
 375
Merger and acquisition expenses —
 —
 —
 —
 604
 604
Depreciation and amortization of property and equipment 7,137
 1,864
 37
 4
 104
 9,146
Amortization of intangible assets 12
 1
 4
 23
 1
 41
Total operating expenses 7,306
 2,070
 3,375
 612
 2,856
 16,219
Income (loss) from operations $2,870
 $1,086
 $844
 $(468) $(2,856) $1,476

(1) Intersegment revenues of the Services segment represent service fees earned from the Phase I and Phase II Deployments.
(2) Included in direct operating of the Services segment is $265$265 for the amortization of capitalized software development costs.

The following employee and director stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:
  Phase I Phase II Services Content & Entertainment Corporate Consolidated
Direct operating $—
 $—
 $15
 $(2) $—
 $13
Selling, general and administrative —
 —
 84
 13
 433
 530
Research and development —
 —
 (27) —
 —
 (27)
Total stock-based compensation $—
 $—
 $72
 $11
 $433
 $516






F-35F-34



 Statements of Operations
 For the Three Months Ended March 31, 2011 Statements of Operations
 (Unaudited) For the Fiscal Year Ended March 31, 2013
 Phase I Phase II Services Content & Entertainment Corporate Consolidated Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues from external customers $9,355
 $2,427
 $3,126
 $453
 $—
 $15,361
 $39,646
 $12,464
 $19,920
 $16,050
 $—
 $88,080
Intersegment revenues (1) 2
 —
 804
 (10) —
 796
 —
 —
 951
 32
 —
 983
Total segment revenues 9,357
 2,427
 3,930
 443
 —
 16,157
 39,646
 12,464
 20,871
 16,082
 —
 89,063
Less: Intersegment revenues (2) —
 (804) 10
 —
 (796) —
 —
 (951) (32) —
 (983)
Total consolidated revenues $9,355
 $2,427
 $3,126
 $453
 $—
 $15,361
 $39,646
 $12,464
 $19,920
 $16,050
 $—
 $88,080
Direct operating (exclusive of depreciation and amortization shown below) (2) 123
 118
 627
 424
 —
 1,292
 459
 687
 4,795
 6,548
 —
 12,489
Selling, general and administrative 9
 15
 907
 333
 1,847
 3,111
 92
 139
 3,865
 8,308
 10,719
 23,123
Plus: Allocation of Corporate overhead —
 —
 1,132
 86
 (1,218) —
 —
 —
 5,168
 3,392
 (8,560) —
Provision for doubtful accounts (1) —
 2
 1
 —
 2
 218
 59
 42
 65
 106
 490
Research and development —
 —
 41
 —
 —
 41
 —
 —
 144
 —
 —
 144
Restructuring and transition expenses —
 —
 —
 —
 177
 177
Restructuring expenses —
 —
 —
 340
 —
 340
Merger and acquisition expenses —
 —
 —
 —
 1,267
 1,267
Depreciation and amortization of property and equipment 7,140
 1,450
 18
 1
 8
 8,617
 28,549
 7,371
 148
 72
 358
 36,498
Amortization of intangible assets 11
 —
 4
 68
 —
 83
 46
 7
 27
 1,483
 2
 1,565
Total operating expenses 7,282
 1,583
 2,731
 913
 814
 13,323
 29,364
 8,263
 14,189
 20,208
 3,892
 75,916
Income (loss) from operations $2,073
 $844
 $395
 $(460) $(814) $2,038
 $10,282
 $4,201
 $5,731
 $(4,158) $(3,892) $12,164

(1) Included in intersegmentIntersegment revenues of the Services segment is $733 forprincipally represent service fees earned from the Phase I and Phase II Deployments.
(2) Included in direct operating of the Services segment is $65$1,165 for the amortization of capitalized software development costs.

The following employee and director stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:
 Phase I Phase II Services Content & Entertainment Corporate Consolidated Phase I Phase II Services Content & Entertainment Corporate Consolidated
Direct operating $—
 $—
 $5
 $1
 $—
 $6
 $—
 $—
 $67
 $15
 $—
 $82
Selling, general and administrative —
 —
 46
 7
 510
 563
 —
 —
 67
 84
 1,903
 2,054
Research and development —
 —
 11
 —
 —
 11
 —
 —
 143
 —
 —
 143
Total stock-based compensation $—
 $—
 $62
 $8
 $510
 $580
 $—
 $—
 $277
 $99
 $1,903
 $2,279


F-36F-35



 
Statements of Operations

 
Statements of Operations

 For the Fiscal Year Ended March 31, 2012 For the Fiscal Year Ended March 31, 2012
 Phase I Phase II Services Content & Entertainment Corporate Consolidated Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues from external customers $44,561
 $13,335
 $17,065
 $1,596
 $—
 $76,557
 $42,028
 $11,714
 $21,219
 $1,596
 $—
 $76,557
Intersegment revenues (1) 7
 —
 4,975
 132
 —
 5,114
 —
 —
 821
 132
 —
 953
Total segment revenues 44,568
 13,335
 22,040
 1,728
 —
 81,671
 42,028
 11,714
 22,040
 1,728
 —
 77,510
Less: Intersegment revenues (7) —
 (4,975) (132) —
 (5,114) —
 —
 (821) (132) —
 (953)
Total consolidated revenues $44,561
 $13,335
 $17,065
 $1,596
 $—
 $76,557
 $42,028
 $11,714
 $21,219
 $1,596
 $—
 $76,557
Direct operating (exclusive of depreciation and amortization shown below) (2) 545
 365
 4,220
 1,912
 —
 7,042
 545
 365
 4,220
 1,912
 —
 7,042
Selling, general and administrative 221
 202
 3,434
 1,791
 10,069
 15,717
 221
 202
 3,434
 1,791
 10,069
 15,717
Plus: Allocation of Corporate overhead —
 —
 5,785
 356
 (6,141) —
 —
 —
 5,785
 356
 (6,141) —
Provision for doubtful accounts 56
 28
 —
 375
 —
 459
Research and development —
 —
 175
 —
 —
 175
 —
 —
 175
 —
 —
 175
Provision for doubtful accounts 56
 28
 —
 375
 —
 459
Restructuring and transition expenses —
 —
 —
 —
 1,207
 1,207
 —
 —
 —
 —
 1,207
 1,207
Merger and acquisition expenses —
 —
 —
 —
 604
 604
 —
 —
 —
 —
 604
 604
Depreciation and amortization of property and equipment 28,553
 6,778
 158
 8
 368
 35,865
 28,553
 6,778
 158
 8
 368
 35,865
Amortization of intangible assets 46
 6
 16
 225
 1
 294
 46
 6
 16
 225
 1
 294
Total operating expenses 29,421
 7,379
 13,788
 4,667
 6,108
 61,363
 29,421
 7,379
 13,788
 4,667
 6,108
 61,363
Income (loss) from operations $15,140
 $5,956
 $3,277
 $(3,071) $(6,108) $15,194
 $12,607
 $4,335
 $7,431
 $(3,071) $(6,108) $15,194
(1) Intersegment revenues of the Services segment represent service fees earned from the Phase I and Phase II Deployments.
(2) Included in direct operating of the Services segment is $759$759 for the amortization of capitalized software development costs.


The following employee and director stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:
 Phase I Phase II Services Content & Entertainment Corporate Consolidated Phase I Phase II Services Content & Entertainment Corporate Consolidated
Direct operating $—
 $—
 $35
 $10
 $—
 $45
 $—
 $—
 $35
 $10
 $13
 $58
Selling, general and administrative —
 —
 248
 25
 1,561
 1,834
 —
 —
 248
 25
 2,385
 2,658
Research and development —
 —
 116
 —
 —
 116
 —
 —
 116
 —
 —
 116
Total stock-based compensation $—
 $—
 $399
 $35
 $1,561
 $1,995
 $—
 $—
 $399
 $35
 $2,398
 $2,832


F-37F-36



  
Statements of Operations

  For the Fiscal Year Ended March 31, 2011
  Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues from external customers $43,431
 $6,481
 $7,399
 $1,128
 $—
 $58,439
Intersegment revenues (1) 2
 —
 4,364
 —
 —
 4,366
Total segment revenues 43,433
 6,481
 11,763
 1,128
 —
 62,805
Less: Intersegment revenues (2) —
 (4,364) —
 —
 (4,366)
Total consolidated revenues $43,431
 $6,481
 $7,399
 $1,128
 $—
 $58,439
Direct operating (exclusive of depreciation and amortization shown below) (2) 361
 185
 2,455
 1,328
 —
 4,329
Selling, general and administrative 35
 49
 2,561
 1,319
 7,813
 11,777
Plus: Allocation of Corporate overhead —
 —
 4,863
 388
 (5,251) —
Provision for doubtful accounts 96
 11
 28
 9
 —
 144
Research and development —
 —
 256
 —
 —
 256
Restructuring and transition expenses —
 —
 —
 —
 1,403
 1,403
Depreciation and amortization of property and equipment 28,557
 3,170
 149
 2
 38
 31,916
Amortization of intangible assets 46
 —
 18
 269
 —
 333
Total operating expenses 29,095
 3,415
 10,330
 3,315
 4,003
 50,158
Income (loss) from operations $14,336
 $3,066
 $(2,931) $(2,187) $(4,003) $8,281
(1) Included in intersegment revenues of the Services segment is $4,293 for service fees earned from the Phase I and Phase II Deployments.
(2) Included in direct operating of the Services segment is $636 for the amortization of capitalized software development costs.

The following employee stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:
  Phase I Phase II Services Content & Entertainment Corporate Consolidated
Direct operating $—
 $—
 $42
 $12
 $—
 $54
Selling, general and administrative —
 —
 174
 23
 1,858
 2,055
Research and development —
 —
 50
 —
 —
 50
Total stock-based compensation $—
 $—
 $266
 $35
 $1,858
 $2,159


12.RESTRUCTURING AND TRANSITION EXPENSES

During the three monthsfiscal year ended DecemberMarch 31, 2011,2012, the Company completed a strategic assessment of its resource requirements for its ongoing businesses which resulted in a workforce reduction, lease termination and a severance and employee related charge of $832. $1,207. During the fiscal year ended March 31, 2013, the Company paid $903 of the amounts that were accrued as of March 31, 2012.

During the three months ended March 31,September 30, 2012, the Company recorded an additional $375 relatedcompleted a strategic assessment of its resource requirements within its Content & Entertainment reporting segment which, based upon the continued integration of the New Video Acquisition, continued shift in its business from physical to digital content distribution and shift to a greater share of its own theatrical releasing product, resulted in a workforce reduction and severance and a lease termination. The totalemployee related expense of $1,207 for$340. During the remainder of the fiscal year ended March 31, 2012 is reflected2013, the Company paid all of the amounts that were accrued as restructuring and transition expenses in the Company's consolidated statements of operations.September 30, 2012.


F-38


A summary of activity for restructuring activities included in accounts payable and accrued expenses is as follows:
  Balance at March 31, 2011 Total Cost Amounts Paid Balance at March 31, 2012
  $—
 $1,207
 $(254) $953

During the fiscal year ended March 31, 2011, the Company incurred $1,403 in transition costs principally associated with the retirement of our former CEO.
Balance at March 31, 2012 Total Cost Amounts Paid/Adjusted Balance at March 31, 2013
$953
 $340
 $(1,293) $—

13.RELATED PARTY TRANSACTIONS

In August 2009, the Company hired Adam M. Mizel to be its Chief Financial Officer and Chief Strategy Officer.  Mr. Mizel has been a member of the Company’s Board of Directors since March 2009 and is currently the Managing Principal of Aquifer Capital Group, LLC and the General Partner of the Aquifer Opportunity Fund, L.P., which is one of the Company's largest shareholders.

Pursuant to the 2010 Note, Sageview iswas entitled to designate two nominees for election to the Board at each annual meeting of the Company's stockholders, subject to the loss of such designation rights upon certain reductions in the aggregate principal amount outstanding of the 2010 Note and the beneficial ownership of shares of Class A Common Stock by Sageview. As discussed in Note 7, the 2010 Note was repaid in February 2013. Edward A. Gilhuly, anda principal of Sageview, resigned from the Company's Board of Directors in March 2013. Laura Nisonger Sims are the two current Sageview directors.remains as a director designated by Sageview.


14.INCOME TAXES

The components of the benefit from income taxes for the fiscal year ended March 31, 2013 was as follows:

 For the fiscal year ending March 31,
 2013
Federal: 
Deferred$4,731
Total federal4,731
  
State: 
Current(75)
Deferred288
Total state213
  
Total benefit from income taxes$4,944

The Company did not record any current or deferredrecognize income tax benefit from income taxes inor expense during the fiscal yearsyear ended March 31, 2012 and 2011.2012.

F-37


Net deferred tax liabilities consisted of the following:
As of March 31,As of March 31,
2012 20112013 2012
Deferred tax assets:      
Net operating loss carryforwards$76,865
 $71,144
$99,342
 $88,077
Stock based compensation4,024
 4,187
4,020
 4,024
Revenue deferral129
 2,352
119
 129
Interest rate swap743
 745
421
 743
Capital loss carryforwards3,727
 —
3,734
 3,727
Other175
 517
581
 182
Total deferred tax assets before valuation allowance85,663
 78,945
108,217
 96,882
Less: Valuation allowance(53,257) (47,700)(71,409) (64,476)
Total deferred tax assets after valuation allowance$32,406
 $31,245
$36,808
 $32,406
Deferred tax liabilities: 
  
 
  
Depreciation and amortization$(32,104) $(30,948)$(31,852) $(32,104)
Intangibles(302) (297)(4,956) (302)
Total deferred tax liabilities(32,406) (31,245)(36,808) (32,406)
Net deferred tax$—
 $—
$—
 $—

The Company has provided a valuation allowance equal to its net deferred tax assets for the fiscal years ended March 31, 20122013 and 20112012. The Company is required to recognize all or a portion of its deferred tax assets if it believes that it is more likely than not, given the weight of all available evidence, that all or a portion of its deferred tax assets will be realized. Management assesses the realizability of the deferred tax assets at each interim and annual balance sheet date based on actual and forecasted operating results. The Company assessed both its positive and negative evidence to determine the proper amount of its required valuation allowance. Factors considered include the Company's current taxable income and projections of future taxable income. Management increased the valuation allowance by $5,557$6,933 (net of the reduction described hereafter) and $7,543$5,557 during the fiscal years ended March 31, 2013 and 2012, respectively. A net deferred tax liability of $5,019 was recorded upon the New Video Acquisition for the excess of the financial statement basis over the tax basis of the acquired assets and liabilities. As New Video will be included in the Company's consolidated federal and state tax returns, deferred tax liabilities assumed in the New Video Acquisition are able to offset the reversal of the Company's pre-existing deferred tax assets. Accordingly, the Company's valuation allowance has been reduced by $5,019 and recorded as a deferred tax benefit in the accompanying consolidated statements of operations for the fiscal year ended March 31, 20122013 and 2011, respectively.. Management will continue to assess the realizability of the deferred tax assets at each interim and

F-39


annual balance sheet date based onupon actual and forecasted operating results.

At March 31, 20122013, the Company had Federal and state net operating loss carryforwards of approximately $200,000$254,000 available to reduce future taxable income.  The federal net operating loss carryforwards will begin to expire in 2020.  Under the provisions of the Internal Revenue Code, certain substantial changes in the Company's ownership may result in a limitation on the amount of net operating losses that may be utilized in future years.  As of March 31, 20122013, approximately $6,300$6,300 of the Company's  net  operating loss from periods prior to November 2003 are subject to an annual Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382") limitation of approximately $1,300,$1,300, and approximately $25,100$25,100 of net operating losses from periods prior to March 2006 are subject to an annual Section 382 limitation of approximately $9,400.$9,400.  Net operating losses of approximately $164,600,$208,000, which were generated since March 2006 are currently not subject to an annual limitation under Section 382.  Future significant ownership changes could cause a portion or all of these net operating losses to expire before utilization.



F-38


The differences between the United States statutory federal tax rate and the Company’s effective tax rate are as follows:
     
As of March 31,As of March 31,
2012 20112013 2012
Provision at the U.S. statutory federal tax rate34.0 % 34.0 %34.0 % 34.0 %
State income taxes, net of federal benefit0.6
 5.4
2.9
 0.6
Change in valuation allowance(44.2) (32.9)(18.6) (44.2)
Disallowed interest(6.7) (3.7)(1.7) (6.7)
Non-deductible equity compensation(4.3) (1.6)(2.6) (4.3)
Sale of subsidiary21.2
 —
6.3
 21.2
Other(0.6) (1.2)(1.3) (0.6)
Income tax (provision) benefit— % — %
Income tax benefit19.0 % — %

Since April 1, 2007, the Company has applied accounting principles that clarifiesclarify the accounting and disclosure for uncertainty in income taxes. As of March 31, 20122013 and 2011,2012, the Company did not have any uncertainties in income taxes.

The Company files income tax returns in the U.S. federal jurisdiction and various states. For federal income tax purposes, the Company’s fiscal 2010 through 20122013 tax years remain open for examination by the tax authorities under the normal three year statute of limitations.  For state tax purposes, the Company’s fiscal 20082009 through 20122013 tax years generally remain open for examination by most of the tax authorities under a four year statute of limitations.


15.QUARTERLY FINANCIAL DATA (Unaudited) ($ in thousands, except for share and per share data)

For the Fiscal Year Ended March 31, 20123/31/2012
 12/31/2011 9/30/2011 6/30/2011
For the Fiscal Year Ended March 31, 20133/31/2013
 12/31/2012
 9/30/2012
 
6/30/2012(3)
Revenues$17,695
 $19,793
 $21,028
 $18,041
$21,355
 $23,212
 $22,609
 $20,904
Net loss from continuing operations (1)$(5,526) $(3,751) $(662) $(4,024)
Net (loss) income from continuing operations (1)$(16,328) $(1,784) $(2,621) $151
Basic and diluted net loss per share from continuing operations(2)$(0.15) $(0.10) $(0.02) $(0.12)$(0.34) $(0.03) $(0.06) $0.00
Shares used in computing basic and diluted net loss per share37,643,582
 37,620,287
 37,115,346
 32,632,563
48,320,257
 48,320,257
 48,299,715
 45,119,838
              
(1) Includes the following:              
Change in fair value of interest rate swap related to the 2010 Term Loans (see Note 7)$171
 $597
 $219
 $(787)
Debt prepayment fees$(3,725) $—
 $—
 $—
Loss on extinguishment of notes payable$(7,905) $—
 $—
 $—

(2) Amount is calculated based upon net loss from continuing operations divided by shares used in computing basic and diluted net loss per share. The sum of net loss from continuing operations per fully diluted share across the table may not equal the fiscal year ended March 31, 2013 amount due to rounding.
(3) As adjusted for the release of the income tax valuation allowance discussed further in Note 1.

For the Fiscal Year Ended March 31, 20123/31/2012
 12/31/2011 9/30/2011 6/30/2011
Revenues$17,695
 $19,793
 $21,028
 $18,041
Net loss from continuing operations$(5,526) $(3,751) $(662) $(4,024)
Basic and diluted net loss per share from continuing operations$(0.15) $(0.10) $(0.02) $(0.12)
Shares used in computing basic and diluted net loss per share37,643,582
 37,620,287
 37,115,346
 32,632,563


F-40F-39


For the Fiscal Year Ended March 31, 20113/31/2011
 12/31/2010 9/30/2010 6/30/2010
Revenues$15,361
 $16,087
 $13,380
 $13,611
Net loss from continuing operations (1)$(4,919) $(2,399) $(3,346) $(10,957)
Basic and diluted net loss per share from continuing operations$(0.15) $(0.08) $(0.11) $(0.37)
Shares used in computing basic and diluted net loss per share32,144,731
 31,330,641
 30,294,306
 29,421,168
        
(1) Includes the following:       
Loss on extinguishment of debt related to the GE Credit Facility (see Note 7)$—
 $—
 $—
 $(4,448)
Change in fair value of interest rate swap related to the 2010 Term Loans (see Note 7)$(199) $318
 $(987) $(458)
Change in fair value of warrant liability related to the Sageview Warrants (see Note 7)$—
 $—
 $(1,891) $5,033


16.VALUATION AND QUALIFYING ACCOUNTS
Allowance for doubtful accounts (2)Balance at Beginning of Year Bad Debt Expense Deductions (1) Balance at End of YearBalance at Beginning of Year Bad Debt Expense 
Deductions (1)
 Balance at End of Year
For the Fiscal Year Ended March 31, 2013$257
 $490
 $(48) $699
For the Fiscal Year Ended March 31, 2012$73
 $459
 $(275) $257
$73
 $459
 $(275) $257
For the Fiscal Year Ended March 31, 2011$118
 $144
 $(189) $73
 

(1)
Represents write-offs of specific accounts receivable.
(2)
Excludes discontinued operations.

17.SUBSEQUENT EVENTS

On April 19, 2012, the Company entered into an underwriting agreement (the “First Underwriting Agreement”) with B. Riley & Co., LLC (“B. Riley”) pursuant to which B. Riley agreed to act as underwriter of 3,885,004 shares of the Company’s Class A common stock being offered, and on April 20, 2012, the Company entered into an underwriting agreement (the “Second Underwriting Agreement” and, together with the First Underwriting Agreement, the “Underwriting Agreements”) with B. Riley as Representative of the several underwriters (the “Underwriters”), pursuant to which the Underwriters agreed to act as underwriters of an additional 3,257,853 shares of the Company’s Class A common stock being offered. The securities, consisting of a total of 7,142,857 shares, were offered by the Company pursuant to a shelf registration statement on Form S-3 declared effective by the Securities and Exchange Commission on April 9, 2012 (File No. 333-179970) and an applicable prospectus supplement (the “Underwritten Offering”). Pursuant to the Underwriting Agreements and subject to the terms and conditions expressed therein (i) the Underwriters offered such securities to the public at the public offering price of $1.40 and (ii) the Company agreed to sell these securities to the Underwriters at a purchase price equal to $1.316 per share, representing a per security discount equal to 6 percent of the public offering price per security, provided that, with respect to the shares sold pursuant to the First Underwriting Agreement, the discount also included an aggregate amount equal to $100,000. At the Underwriters’ discretion, the Underwriters had a 30 day option to buy up to an additional 714,286 shares from the Company at the public offering price less the underwriting discounts and commissions to cover these sales. On April 23, 2012, the Underwriters exercised the entire over-allotment option. The Company also agreed to bear the expenses of the Underwritten Offering. The closing of the Underwritten Offering occurred on April 25, 2012, resulting in net proceeds to the Company of $10.2 million.

On April 19, 2012, the Company entered into a stock purchase agreement for the purchase of all of the issued and outstanding capital stock of New Video Group, Inc. (“New Video”), an independent home entertainment distributor of quality packaged and digital content that provides distribution services in the DVD, BD, Digital and VOD channels for more than 500 independent rights holders (the “New Video Acquisition”). The Company agreed to pay $10.0 million in cash and 2,525,417 shares of Class A common stock, subject to certain transfer restrictions, plus up to an additional $6.0 million in cash or Class A common stock, at the Company’s discretion, if certain business unit financial performance targets are met in 2013, 2014 and 2015. In addition,
the Company has agreed to register the resale of the shares of Class A common stock paid as part of the purchase price. The New Video Acquisition was consummated on April 20, 2012. The Company is currently in the process of determining the fair value of assets acquired and liabilities assumed. Merger and acquisition expenses, consisting primarily of professional fees, directly related to the acquisition of New Video totaled $1.7 million, of which $1.1 million was incurred subsequent to March 31, 2012.

In connection with the purchase of New Video, the Company's consent and control agreement with a bank was terminated, thereby releasing cash proceeds partially used for the New Video Acquisition.

On April 26, 2012, the holder of 25,000 shares of the Company's Class B common stock converted all of the Class B shares into 25,000 Class A common stock shares. Accordingly, the Company no longer has any Class B common stock outstanding.







F-41F-40


PART II. OTHER INFORMATION


ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
 
Management's Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is identified in Exchange Act Rules 13a-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, our Principal Executive Officer or Chief Executive Officer and Principal Financial & Accounting Officer or Chief Financial Officer, and effected by the Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A company’scompany's control over financial reporting includes those policies and procedures that:

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of the company;
provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures of the company are being made only in accordance with authorizations of our management and our directors of the company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’scompany's assets that could have a material effect on the financial statements.

Internal control over financial reporting has inherent limitations which may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the level of compliance with related policies or procedures may deteriorate.

In making the assessment, management used the framework in “Internal Control –Integrated-Integrated Framework” promulgated by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria. Based on that assessment, our Principal Executive Officer and Principal Financial & Accounting Officer concluded that our internal controls over financial reporting were effective as of March 31, 20122013.  This annual report on Form 10-K does not include an attestation report of the Company’sCompany's registered public accounting firm regarding internal control over financial reporting.  

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, identified in connection with the evaluation required by paragraph (d) of the Exchange Act, that occurred during this fiscal quarter ended March 31, 20122013, has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.OTHER INFORMATION

None.


4241


PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.     DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Except as set forth below, the information required by this item will appear in Cinedigm’s Proxy Statement for our 20122013 Annual Meeting of Stockholders to be held on or about September 12, 20122013, which will be filed pursuant to Regulation 14A under the Exchange Act and is incorporated by reference in this report pursuant to General Instruction G(3) of Form 10-K (other than the portions thereof not deemed to be “filed” for the purpose of Section 18 of the Exchange Act).

Code of Ethics

We have adopted a code of ethics applicable to all members of the Board, executive officers and employees. Such code of ethics is available on our Internet website, www.cinedigmcorp.com.www.cinedigm.com. We intend to disclose any amendment to, or waiver of, a provision of our code of ethics by filing a Form 8-K with the SEC.

ITEM 11.EXECUTIVE COMPENSATION
ITEM 11.     EXECUTIVE COMPENSATION

Information required by this item will appear in Cinedigm’s Proxy Statement and is incorporated by reference in this report pursuant to General Instruction G(3) of Form 10-K (other than the portions thereof not deemed to be “filed” for the purpose of Section 18 of the Exchange Act).

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS

Information required by this item will appear in Cinedigm’s Proxy Statement and is incorporated by reference in this report pursuant to General Instruction G(3) of Form 10-K (other than the portions thereof not deemed to be “filed” for the purpose of Section 18 of the Exchange Act).

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item will appear in Cinedigm’s Proxy Statement and is incorporated by reference in this report pursuant to General Instruction G(3) of Form 10-K (other than the portions thereof not deemed to be “filed” for the purpose of Section 18 of the Exchange Act).

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this item will appear in Cinedigm’s Proxy Statement and is incorporated by reference in this report pursuant to General Instruction G(3) of Form 10-K (other than the portions thereof not deemed to be “filed” for the purpose of Section 18 of the Exchange Act).


42


PART IV

ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements
See Index to Financial Statements on page 4140 herein.

(a)(2) Financial Statement Schedules
None.

(a)(3) Exhibits
The exhibits are listed in the Exhibit Index beginning on page 4746 herein.


43


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CINEDIGM DIGITAL CINEMA CORP.

    
Date:June 15, 201219, 2013By: /s/ Christopher J. McGurk
   
Christopher J. McGurk
Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)
    
    
Date:June 15, 201219, 2013By: /s/ Adam M. Mizel
   
Adam M. Mizel
Chief Operating Officer, Chief Financial Officer and Director
(Principal Financial Officer)
    
    
Date:June 15, 201219, 2013By: /s/ John B. Brownson
   
John B. Brownson
Senior Vice President – Accounting & Finance
(Principal Accounting Officer)
    

44


POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints Christopher J. McGurk and Gary S. Loffredo, and each of them individually, his or her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments to this Report together with all schedules and exhibits thereto, (ii) act on, sign and file with the Securities and Exchange Commission any and all exhibits to this Report and any and all exhibits and schedules thereto, (iii) act on, sign and file any and all such certificates, notices, communications, reports, instruments, agreements and other documents as may be necessary or appropriate in connection therewith and (iv) take any and all such actions which may be necessary or appropriate in connection therewith, granting unto such agents, proxies and attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, and hereby approving, ratifying and confirming all that such agents, proxies and attorneys-in-fact, any of them or any of his, her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE(S)SIGNATURES(S) TITLE(S)DATE
    
/s/ Christopher J. McGurk Chief Executive OfficerJune 15, 201219, 2013
Christopher J. McGurk and Chairman of the Board of Directors 
  (Principal Executive Officer) 
 
    
/s/ Adam M. Mizel Chief Operating Officer, Chief Financial Officer andJune 15, 201219, 2013
Adam M. Mizel Director (Principal Financial Officer) 
 
    
/s/ Gary S. Loffredo President of Digital Cinema, General Counsel,June 15, 201219, 2013
Gary S. Loffredo Secretary and Director 
 
 
    
/s/ John B. Brownson Senior Vice President - Accounting and FinanceJune 15, 201219, 2013
John B. Brownson (Principal Accounting Officer) 
 
    
/s/ Peter C. Brown DirectorJune 15, 201219, 2013
Peter C. Brown   
 
    
/s/ Wayne L. Clevenger DirectorJune 15, 201219, 2013
Wayne L. Clevenger   
 
 

45


    
/s/ Matthew W. Finlay DirectorJune 15, 201219, 2013
Matthew W. Finlay
    
    
/s/ Edward A. GilhulyMartin B. O'Connor II DirectorJune 15, 201219, 2013
Edward A. GilhulyMartin B. O'Connor II
    
 
/s/ Martin B. O’Connor IIDirectorJune 15, 2012
Martin B. O’Connor II
    
/s/ Laura Nisonger Sims DirectorJune 15, 201219, 2013
Laura Nisonger Sims   


4645



EXHIBIT INDEX

Exhibit
Number
 
Description of Document
2.1‑‑Securities Purchase Agreement, dated as of August 11, 2009, by and among the Company and the Purchaser. (16)(11)
2.1.1‑‑Amendment and Waiver, dated as of November 4, 2009, to Securities Purchase Agreement by and among the Company, the Subsidiary Note Parties party thereto and Sageview Capital Master, L.P., as Collateral Agent. (17)(12)
2.1.2‑‑Amendment and Restatement Agreement, dated as of May 6, 2010, between Cinedigm Digital Cinema Corp. and Sageview Capital Master L.P. (18)(13)
2.2‑‑Common Stock Purchase Agreement among Cinedigm Digital Cinema Corp. and the Investors party thereto dated July 5, 2011. (29)(24)
2.3‑‑Stock Purchase Agreement, dated as of April 19, 2012, by and among the Company, Steve Savage, Susan Margolin and Aimee Connolly. (30)(25) (Specific portions of this agreement have been omitted and have been filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment in accordance with Rule 24B-2 under the Securities Exchange Act of 1934.)
3.1‑‑Fourth Amended and Restated Certificate of Incorporation of the Company, as amended. (17)(29)
3.2‑‑Bylaws of the Company. (23)(18)
3.2.1‑‑Amendment No. 1 to Bylaws of the Company. (24)(19)
4.1‑‑Specimen certificate representing Class A common stock. (1)
4.2‑‑Specimen certificate representing Series A Preferred Stock. (14)(10)
4.3‑‑FormLimited Recourse Pledge Agreement, dated as of Warrant issuedFebruary 28, 2013, made by Cinedigm Digital Cinema Corp. in connection with the Series A Preferred Stock. (15)favor of Prospect Capital Corporation, as Collateral Agent. (30)
4.4‑‑Guaranty, Pledge and Security Agreement, dated as of February 28, 2013, made by Cinedigm DC Holdings, LLC, Access Digital Media, Inc. and Access Digital Cinema Phase 2, Corp., in favor of Prospect Capital Corporation, as Collateral Agent. (30)
4.5‑‑Limited Recourse Guaranty Agreement, dated as of February 28, 2013, made by Cinedigm Digital Cinema Corp. in favor of Prospect Capital Corporation, as Collateral Agent and as Administrative Agent. (35)
4.9‑‑Tax Benefit Preservation Plan, dated as of August 10, 2009, between the Company and American Stock Transfer & Trust Company, as Rights Agent. (19)(14)
4.10‑‑Note issued to the Purchaser pursuant to the Securities Purchase Agreement, dated August 11, 2009, by and among the Company and the Purchaser. (16)
4.10.1‑‑Amended and Restated Note issued to Sageview Capital Master L.P. by Cinedigm Digital Cinema Corp. dated May 6, 2010. (18)(13)
4.11‑‑Form of Warrant issued to the Purchaser pursuant to the Securities Purchase Agreement, dated August 11, 2009, by and among the Company and the Purchaser. (16)Sageview Capital Master L.P. (11)
4.12‑‑Registration Rights Agreement, dated as of August 11, 2009, by and among the Company and the Purchaser. (16)
4.14‑‑Registration Rights Agreement, dated as of August 11, 2009, by and among the Company and ImperialSageview Capital LLC. (16)Master L.P. (11)
4.16‑‑Guaranty and Security Agreement, dated as of May 6, 2010, among Cinedigm Digital Funding I, LLC and each Grantor from time to time party thereto and General Electric Capital Corporation, as Collateral Agent. (18)(13)
4.16.1‑‑Amended and Restated Guaranty and Security Agreement, dated as of February 28, 2013, among Cinedigm Digital Funding I, LLC and each Grantor from time to time party thereto and Société Générale, New York Branch, as Collateral Agent. (30)
4.17‑‑Pledge Agreement, dated as of May 6, 2010, between Access Digital Media, Inc. and General Electric Capital Corporation, as Collateral Agent. (18)(13)
4.17.1‑‑Amended and Restated Pledge Agreement, dated as of February 28, 2013, between Access Digital Media, Inc. and Société Générale, New York Branch, as Collateral Agent. (30)
4.18‑‑Pledge Agreement, dated as of May 6, 2010, between Christie/AIX, Inc. and General Electric Capital Corporation, as Collateral Agent. (18)(13)
4.18.1‑‑Amended and Restated Pledge Agreement, dated as of February 28, 2013, between Christie/AIX, Inc. and Société Générale, New York Branch, as Collateral Agent. (30)
4.19‑‑Registration Rights Agreement among Cinedigm Digital Cinema Corp. and the Investors party thereto dated July 7, 2011. (29)(24)

46


4.20‑‑Guaranty and Security Agreement, dated as of October 18, 2011, among Cinedigm Digital Funding 2, LLC, each Grantor from time to time party thereto and Société Générale, New York Branch, as Collateral Agent. (31)(26)
4.21‑‑Security Agreement, dated as of October 18, 2011, between CHG-MERIDIAN U.S. Finance, Ltd. And Société Générale, New York Branch, as Collateral Agent. (31)(26)
4.22‑‑Security Agreement, dated as of October 18, 2011, among CDF2 Holdings, LLC and each Grantor from time to time party thereto and Société Générale, New York Branch, as Collateral Agent for the Lenders and each other Secured Party. (31)(26)
4.23‑‑Security Agreement, dated as of October 18, 2011, among CDF2 Holdings, LLC and each Grantor from time to time party thereto and Société Générale, New York Branch, as Collateral Agent for CHG-Meridian U.S. Finance, Ltd. And any other CHG Lease Participants. (31)(26)
4.24‑‑Pledge Agreement, dated as of October 18, 2011, between Access Digital Cinema Phase 2 Corp. and Société Générale, as Collateral Agent. (31)

47


Exhibit NumberDescription of Document(26)
4.25‑‑Pledge Agreement, dated as of October 18, 2011, between CDF2 Holdings, LLC and Société Générale, as Collateral Agent. (31)(26)
10.1‑‑Separation Agreement between Cinedigm Digital Cinema Corp. and A. Dale Mayo dated as of June 22, 2010. (25)(20)
10.2‑‑Employment Agreement between the Company and Adam M. Mizel, dated as of August 11, 2009. (16)
10.2.1‑‑
Employment Agreement between Cinedigm Digital Cinema Corp. and Adam M. Mizel dated as of October 19, 2011. (32)(27)
10.3‑‑Second Amended and Restated 2000 Equity Incentive Plan of the Company. (10)(6)
10.3.1‑‑Amendment dated May 9, 2008 to the Second Amended and Restated 2000 Equity Incentive Plan of the Company. (12)(8)
10.3.2‑‑Form of Notice of Restricted Stock Award. (10)(6)
10.3.3‑‑Form of Non-Qualified Stock Option Agreement. (11)(7)
10.3.4‑‑Form of Restricted Stock Unit Agreement (employees). (12)(8)
10.3.5‑‑Form of Stock Option Agreement. (4)(3)
10.3.6‑‑Form of Restricted Stock Unit Agreement (directors). (12)(8)
10.3.7‑‑Amendment No. 2 dated September 4, 2008 to the Second Amended and Restated 2000 Equity Incentive Plan of the Company. (13)(9)
10.3.8‑‑Amendment No. 3 dated September 30, 2009 to the Second Amended and Restated 2000 Equity Incentive Plan of the Company. (20)(15)
10.3.9‑‑Amendment No. 4 dated September 14, 2010 to the Second Amended and Restated 2000 Equity Incentive Plan of the Company. (26)(21)
10.3.10‑‑Amendment No. 5 dated April 20, 2012 to the Second Amended and Restated 2000 Equity Incentive Plan of the Company. (30)(25)
10.3.11‑‑Amendment No. 6 dated September 12, 2012 to the Second Amended and Restated 2000 Equity Incentive Plan of the Company. (28)
10.4‑‑Cinedigm Digital Cinema Corp. Management Incentive Award Plan. (21)(16)
10.5‑‑Form of Indemnification Agreement for non-employee directors. (22)(17)
10.6‑‑Lease Agreement, dated as of March 10, 2005, between the Company and 55 Madison Avenue Associates, LLC. (28)(23)
10.6.1‑‑
First Lease Extension Agreement dated as of January 16, 2009, between the Company and 55 Madison Avenue Associates, LLC. (28)

(23)
10.7‑‑Agreement of Lease, dated as of July 18, 2000, between the Company and 1-10 Industry Associates, LLC. (2)
10.8‑‑Agreement of Lease, dated as of January 18, 2000, between the Company (by assignment from BridgePoint International (Canada), Inc.) and 75 Broad, LLC. (2)
10.8.1‑‑
Additional Space and Lease Modification to the Agreement of Lease, dated as of January 18, 2000, between the Company (by assignment from BridgePoint International (Canada), Inc.) and 75 Broad, LLC dated May 16, 2000. (2)

10.8.2‑‑
Second Additional Space and Lease Modification to the Agreement of Lease, dated as of January 18, 2000, between the Company (by assignment from BridgePoint International (Canada), Inc.) and 75 Broad, LLC dated August 15, 2000. (2)
10.9‑‑Confidentiality, Inventions and Noncompete Agreement, dated as of January 9, 2004, between the Company and Erik B. Levitt. (3)
10.10‑‑Lease Agreement, dated as of August 9, 2002, by and between OLP Brooklyn Pavilion LLC and Pritchard Square Cinema LLC. (8)(5)
10.10.1‑‑First Amendment to Contract of Sale and Lease Agreement, dated as of August 9, 2002, by and among Pritchard Square LLC, OLP Brooklyn Pavilion LLC and Pritchard Square Cinema, LLC. (8)(5)
10.10.2‑‑Second Amendment to Contract of Sale and Lease Agreement, dated as of April 2, 2003, by and among Pritchard Square LLC, OLP Brooklyn Pavilion LLC and Pritchard Square Cinema, LLC. (8)(5)
10.10.3‑‑Third Amendment to Contract of Sale and Lease Agreement, dated as of November 1, 2003, by and among Pritchard Square LLC, OLP Brooklyn Pavilion LLC and Pritchard Square Cinema, LLC. (8)(5)
10.10.4‑‑Fourth Amendment to Lease Agreement, dated as of February 11, 2005, between ADM Cinema Corporation and OLP Brooklyn Pavilion LLC. (4)

47


10.11‑‑Employment Agreement between Cinedigm Digital Cinema Corp. and Gary S. Loffredo dated as of October 19, 2011. (32)

48


Exhibit NumberDescription of Document(27)
10.12‑‑Amended and Restated Digital Cinema Framework Agreement, dated as of September 30, 2005, by and among Access Digital Media, Inc., Christie/AIX, Inc. and Christie Digital Systems USA, Inc. (6) (Confidential treatment granted under Rule 24b-2 as to certain portions which are omitted and filed separately with the SEC.)
10.13‑‑Digital Cinema Deployment Agreement, dated September 14, 2005, by and among Buena Vista Pictures Distribution, Christie/AIX, Inc. and Christie Digital Systems USA, Inc. (6) (Confidential treatment granted under Rule 24b-2 as to certain portions which are omitted and filed separately with the SEC.)
10.14‑‑Digital Cinema Deployment Agreement, dated October 12, 2005, by and between Twentieth Century Fox Film Corporation and Christie/AIX, Inc. (6) (Confidential treatment granted under Rule 24b-2 as to certain portions which are omitted and filed separately with the SEC.)
10.15‑‑Digital Cinema Agreement, dated as of October 20, 2005, by and between Universal City Studios, LLP and Christie/AIX, Inc. (7) (Confidential treatment granted under Rule 24b-2 as to certain portions which are omitted and filed separately with the SEC.)
10.16‑‑Master License Agreement, dated as of December, 2005, by and between Christie/AIX, Inc. and Carmike Cinemas, Inc. (7) (Confidential treatment granted under Rule 24b-2 as to certain portions which are omitted and filed separately with the SEC.)
10.17‑‑Amended and Restated Digital System Supply Agreement, dated September 30, 2005, by and between Christie Digital Systems USA, Inc. and Christie/AIX, Inc. (9) (Confidential treatment granted under Rule 24b-2 as to certain portions which are omitted and filed separately with the SEC.)
10.17.1‑‑Letter Agreement amending the Amended and Restated Digital System SupplyTerm Loan Agreement, dated as of February 21, 2006,28, 2013, by and between Christieamong Cinedigm DC Holdings, LLC, Access Digital Systems USA,Media, Inc., Access Digital Phase 2, Corp., the Guarantors party thereto, the Lenders party thereto and Christie/AIX, Inc. (9) (Confidential treatment granted under Rule 24b-2Prospect Capital Corporation as to certainAdministrative Agent and Collateral Agent. (30) (Specific portions which areof this agreement have been omitted and have been filed separately with the SEC.)
10.17.2‑‑Letter Agreement amendingSecurities and Exchange Commission pursuant to a request for confidential treatment in accordance with Rule 24B-2 under the Amended and Restated Digital System Supply Agreement, entered into on November 2, 2006, by and between Christie Digital Systems USA, Inc. and Christie/AIX, Inc. (9) (Confidential treatment granted under Rule 24b-2 as to certain portions which are omitted and filed separately with the SEC.Securities Exchange Act of 1934.)
10.19‑‑Guarantee and Collateral Agreement, dated as of August 11, 2009, by and among the Company, the PurchaserSageview Capital Master L.P. and the Guarantors. (16)(11)
10.20‑‑Credit Agreement, dated as of May 6, 2010, among Cinedigm Digital Funding I, LLC, the Lenders party thereto and Société Générale, New York Branch, as co-administrative agent and paying agent for the lenders party thereto, and General Electric Capital Corporation, as co-administrative agent and collateral agent for the lenders and secured parties thereto. (18)(13)
10.20.1‑‑Amended and Restated Credit Agreement, dated as of February 28, 2013, among Cinedigm Digital Funding I, LLC, the Lenders party thereto and Société Générale, New York Branch, as administrative agent and collateral agent for the lenders and secured parties thereto. (30)
10.21.1‑‑2002 ISDA Master Agreement between Natixis and Cinedigm Digital Funding I, LLC dated as of June 7, 2010. (27)(22)
10.21.2‑‑Schedule to the 2002 ISDA Master Agreement between Natixis and Cinedigm Digital Funding I, LLC dated as of June 7, 2010. (27)(22)
10.21.3‑‑Swap Transaction Confirmation from Natixis to Cinedigm Digital Funding I, LLC dated as of June 14, 2010. (27)(22)
10.22.1‑‑2002 ISDA Master Agreement between HSBC Bank USA and Cinedigm Digital Funding I, LLC dated as of July 20, 2010. (27)(22)
10.22.2‑‑Schedule to the 2002 ISDA Master Agreement between HSBC Bank USA and Cinedigm Digital Funding I, LLC dated as of July 20, 2010. (27)(22)
10.22.3‑‑Swap Transaction Confirmation from HSBC Bank USA to Cinedigm Digital Funding I, LLC dated as of June 8, 2010. (27)(22)
10.23.1‑‑2002 ISDA Master Agreement between Société Générale and Cinedigm Digital Funding I, LLC dated as of May 28, 2010. (27)(22)
10.23.2‑‑Schedule to the 2002 ISDA Master Agreement between Société Générale and Cinedigm Digital Funding I, LLC dated as of June 7, 2010. (27)(22)
10.23.3‑‑Swap Transaction Confirmation from Société Générale to Cinedigm Digital Funding I, LLC dated as of June 7, 2010. (27)
10.24‑‑Severance Agreement between Cinedigm Digital Cinema Corp. and Charles Goldwater, dated as of September 10, 2010. (26)

49


Exhibit NumberDescription of Document
10.25‑‑Severance Agreement between Cinedigm Digital Cinema Corp. and Gary S. Loffredo, dated as of September 10, 2010. (26)(22)
10.26‑‑Employment Agreement between Cinedigm Digital Cinema Corp. and Christopher J. McGurk dated as of December 23, 2010. (24)(19)
10.27‑‑Stock Option Agreement between Cinedigm Digital Cinema Corp. and Christopher J. McGurk dated as of December 23, 2010. (24)(19)
10.28‑‑Credit Agreement, dated as of October 18, 2011, among Cinedigm Digital Funding 2, LLC, as the Borrower, Société Générale, New York Branch, as Administrative Agent and Collateral Agent, Natixis New York Branch, as Syndication Agent and the Lenders party thereto. (31)(26)
10.29‑‑Multiparty Agreement, dated as of October 18, 2011, among Cinedigm Digital Funding 2, LLC, as Borrower, Access Digital Cinema Phase 2, Corp., CDF2 Holdings, LLC, Cinedigm Digital Cinema Corp., CHG-MERIDIAN U.S. Finance, Ltd., Société Générale, New York Branch, as Senior Agent and Ballantyne Strong, Inc., as Approved Vendor. (31)(26)
10.30‑‑Master Equipment Lease No. 8463, effective as of October 18, 2011, by and between CHG- MERIDIAN U.S. Finance, Ltd. and CDF2 Holdings, LLC. (31)(26)
10.31‑‑Master Equipment Lease No. 8465, effective as of October 18, 2011, by and between CHG-MERIDIAN U.S. Finance, Ltd. and CDF2 Holdings, LLC. (31)(26)
10.32‑‑Sale and Leaseback Agreement, dated as of October 18, 2011, by and between CDF2 Holdings, LLC and CHG-MERIDIAN U.S. Finance, Ltd. (31)(26)
10.33‑‑Sale and Contribution Agreement, dated as of October 18, 2011, among Cinedigm Digital Cinema Corp., Access Digital Cinema Phase 2, Corp., CDF2 Holdings, LLC and Cinedigm Digital Funding 2, LLC. (31)(26)
21.1‑‑List of Subsidiaries.*
23.1‑‑Consent of EisnerAmper LLP.*
24.1‑‑Powers of Attorney.* (Contained on signature page)

48


31.1‑‑Officer's Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2‑‑Officer's Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.3‑‑Officer's Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1‑‑Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2‑‑Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.3‑‑Certification of Chief Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS‑‑XBRL Instance Document.*
101.SCH‑‑XBRL Taxonomy Extension Schema.*
101.CAL‑‑XBRL Taxonomy Extension Calculation.*
101.DEF‑‑XBRL Taxonomy Extension Definition.*
101.LAB‑‑XBRL Taxonomy Extension Label.*
101.PRE‑‑XBRL Taxonomy Extension Presentation.*
* Filed herewith.
 
Documents Incorporated Herein by Reference:
 
(1) Previously filed with the Securities and Exchange Commission on November 4, 2003 as an exhibit to the Company's Amendment No. 3 to Registration Statement on Form SB-2 (File No. 333-107711).

(2) Previously filed with the Securities and Exchange Commission on August 6, 2003 as an exhibit to the Company's Registration Statement on Form SB-2 (File No. 333-107711).

(3) Previously filed with the Securities and Exchange Commission on February 17, 2004 as an exhibit to the Company's Form 10-QSB for the quarter ended December 31, 2003 (File No. 001-31810).


50


(4) Previously filed with the Securities and Exchange Commission on April 25, 2005 as an exhibit to the Company's
Registration Statement on Form S-8 (File No. 333-124290).

(5)(4) Previously filed with the Securities and Exchanged Commission on April 29, 2005 as an exhibit to the Company's Form 8- K (File No. 001-31810).

(6) Previously filed with the Securities and Exchange Commission on November 14, 2005 as an exhibit to the Company's Form 10-QSB for the quarter ended September 30, 2005 (File No. 001-31810).

(7) Previously filed with the Securities and Exchange Commission on February 13, 2006 as an exhibit to the Company's Form 10-QSB (File No. 001-31810).

(8)(5) Previously filed with the Securities and Exchange Commission on June 29, 2006 as an exhibit to the Company's Form 10- KSB for the fiscal year ended March 31, 2006 (File No. 001-31810).

(9) Previously filed with the Securities and Exchange Commission on November 8, 2006 as an exhibit to the Company's Form 8-K (File No. 000-51910).

(10)(6) Previously filed with the Securities and Exchange Commission on September 24, 2007 as an exhibit to the Company's Form 8-K (File No. 000-51910).

(11)(7) Previously filed with the Securities and Exchange Commission on April 3, 2008 as an exhibit to the Company's Form 8-K (File No. 000-51910).

(12)(8) Previously filed with the Securities and Exchange Commission on May 14, 2008 as an exhibit to the Company's Form 8-K (File No. 000-51910).

(13)(9) Previously filed with the Securities and Exchange Commission on February 9, 2009September 10, 2008 as an exhibit to the Company's Form 10-Q for the quarter ended December 31, 20088-K (File No. 000-51910).

(14)(10) Previously filed with the Securities and Exchange Commission on February 9, 2009 as an exhibit to the Company's Form 8-K (File No. 000-51910).

(15) Previously filed with the Securities and Exchange Commission on February 13, 2009 as an exhibit to the Company's Form 8-K (File No. 000-51910).

(16)(11) Previously filed with the Securities and Exchange Commission on August 13, 2009 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(17)(12) Previously filed with the Securities and Exchange Commission on November 13, 2009 as an exhibit to the Company's Form 10-Q for the quarter ended September 30, 2009 (File No. 001-31810).

49



(18)(13) Previously filed with the Securities and Exchange Commission on May 11, 2010 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(19)(14) Previously filed with the Securities and Exchange Commission on August 12, 2009 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(20)(15) Previously filed with the Securities and Exchange Commission on October 6, 2009 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(21)(16) Previously filed with the Securities and Exchange Commission on October 27, 2009 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(22)(17) Previously filed with the Securities and Exchange Commission on September 21, 2009 as an exhibit to the Company's Form 8-K (File No. 001-31810)

(23)(18) Previously filed with the Securities and Exchange Commission on February 10, 2011 as an exhibit to the Company's Form 10-Q for the quarter ended December 31, 2010 (File No. 001-31810).

51



(24)(19) Previously filed with the Securities and Exchange Commission on January 3, 2011 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(25)(20) Previously filed with the Securities and Exchange Commission on June 25, 2010 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(26)(21) Previously filed with the Securities and Exchange Commission on September 16, 2010 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(27)(22) Previously filed with the Securities and Exchange Commission on August 13, 2010 as an exhibit to the Company's Form 10-Q for the quarter ended June 30, 2010 (File No. 001-31810).

(28)(23) Previously filed with the Securities and Exchange Commission on June 14, 2010 as an exhibit to the Company's Form 10-K (File No. 001-31810).

(29)(24) Previously filed with the Securities and Exchange Commission on July 7, 2011 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(30)(25) Previously filed with the Securities and Exchange Commission on April 24, 2012 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(31)(26) Previously filed with the Securities and Exchange Commission on October 24, 2011 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(32)(27) Previously filed with the Securities and Exchange Commission on October 21, 2011 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(28) Previously filed with the Securities and Exchange Commission on September 14, 2012 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(29) Previously filed with the Securities and Exchange Commission on November 13, 2012 as an exhibit to the Company's Form 10-Q for the quarter ended September 30, 2012 (File No. 001-31810).

(30) Previously filed with the Securities and Exchange Commission on March 4, 2013 as an exhibit to the Company's Form 8-K (File No. 001-31810).



5250